Introduction to Economics GEN1704.2/ECN1101.2 L, Mussurov Altay

Economic growth is the expansion of total output produced in the economy. It is usually measured by the expansion of real GDP.

Most economic production requires the producing firm or organization to make an initial investment (in real capital, in engineering and design, in marketing) before even the first unit of production occurs. As total production then grows, the cost per unit of that initial investment shrinks. For this reason, most industries demonstrate economies of scale, whereby the unit cost of production declines as the level of output grows. Because of economies of scale, larger companies have an advantage in most industries, and the economy usually operates more efficiently when it is busy and growing (than when it is shrinking or stagnant).

Employment is a specific form of work, in which the worker performs their labour for someone else in return for a money wage or salary.

The natural environment is an essential aspect of the economy, whose influence is felt in several different ways. Everyone relies on the direct ecological benefits that come from nature. fresh air, clean water, space, climate. And every industry relies on natural resources which are used as necessary inputs to production (land, minerals, forestry and agriculture, energy, and other materials). Finally, (and unfortunately), most economic activities involve the creation of some waste and pollution which is expelled back into the environment.

In neoclassical economics, equilibrium exists when supply equals demand for a particular commodity. General equilibrium is a special (purely hypothetical) condition in which every market (including markets for both final products and factors of production, the latter including labor) is in equilibrium.

The proportion of a company’s total assets which are “owned” outright by the company’s owners. A company’s equity is equal to its value less its debt owed to bankers, bond- holders, and other lenders.

The “price” at which the currency of one country can be converted into the currency of another country. A country’s currency is “strong,” or its exchange rate is “high,” if it can purchase more of another country’s currency. A country’s currency appreciates when its value (compared to other currencies) grows; it depreciates when its value falls.

An export is the sale of a product from one country (either a good or a service) to a purchaser in another country.

Many economic activities have collateral effects (sometimes positive, but more often negative) on other people who are not directly involved in that activity. Examples of externalities include pollution (which imposes a cost on the natural environment and everyone who uses it), congestion (which slows down travel and productivity), and the spill-over impacts of major investment or plant closure decisions.