NAU: Business/Economics 101 Lessons: 1 and 2
Day 834, 03:12
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Published in USA 
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by DMV3
Lesson 1: Intro to Economics
Economics is a social science that studies how individuals, governments, businesses, and nations make choices on allocating scarce resources to satisfy their unlimited wants. Economics is broken down into macroeconomics, which focus on the aggregate economy, and microeconomics which focuses on individual consumers and firms.
Brief Explanation of Macroeconomics:
Macroeconomics examines economy-wide events such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels.
Macroeconomics is focused on the movement and trends in the economy as a whole, while in microeconomics the focus is placed on factors that affect the decisions made by firms and individuals. The factors that are studied by macro and micro will often influence each other, such as the current level of unemployment in the economy as a whole will affect the supply of workers which an specific company can hire from, for example.
Brief Explanation of Microeconomics:
The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets.
Microeconomics looks at the smaller picture and focuses more on basic theories of supply and demand and how individual businesses decide how much of something to produce and how much to charge for it. People who have any desire to start their own business or who want to learn the rationale behind the pricing of particular products and services would be more interested in this area.
Macroeconomics, on the other hand, looks at the big picture (hence "macro"
Law of Demand:
A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa.
Law of Supply:
A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services offered by suppliers increases and vice versa.
Supply & Demand is what determines the prices for goods and services. Running a company, business or any position dealing with finance will deal with Supply&
Supply and Demand essentially says that there is a supply for each good or service and a demand. Let's pretend for a second that I'm making food and I have 20 "units" of food. In the market that I am selling there are 30 "units" of demand. Essentially, people want 30 units of food, but there are only 20.
Supply: 20
Deman
This means there is a shortage of food and therefore the price will rise. Why? Because there is less food and still the same amount of demand, people will be willing to offer a higher price for that food. I would increase my prices knowing that even if I lost potential customers, there are still more customers than products so I would end up selling all my food anyways.
This graph demonstrates how Supply and Demand interact. Notice that we were discussing a scenario where there is a shortage of supply and a surplus of demand. Let's say that after that wonderful day of selling I decide to make 30 units of food anticipating another great day. Turns out that on that day however, there is only a demand for 20 units of food.
Supply: 30
Deman
You can probably guess what is going to happen: prices will fall, because I need to get rid of that surplus product (especially since it will rot).
In a normal, functioning and efficient economy - surplus' and shortages don't last very long (unless there is a drought, disaster, etc. which would affect production), because if there is a shortage, more people will invest in that industry and balance everything out. If there is a surplus, businesses will close or the surplus will be bought due to lower prices for consumers. This means that the supply and demand would come to an "equilibrium". Equilibrium is the point where the supply and demand curves meet.
How can you tell what the correct price is? Take your costs, look at the market and see what the prices are. If prices are below your cost, that means there is more supply than demand. Obviously it gets a bit trickier than that, but you can be assured that there is too much supply when prices are below the costs of producing that good.
Lesson 2: Macroeconomics in eRepublik
Gross Domestic Product (GDP): The monetary value of all the finished goods and services produced within a country's borders in a specific time period.
GDP = C + G + L + S
C: (Cost of creating a company) * (Number of created companies)
G: the total Gold invested in company upgrades
L: (Cost of buying import license) * (Number of import licenses)
S: (Value of sales) * (Recommend Exchange Rate)
Recommended Exchange Rate (RER): recommended rate of exchange from one currency to another.
RER: 1 Gold = (Average Production Cost) * (10 Currency)
Inflation: The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
Deflation: A general decline in prices, often caused by a reduction in the supply of money or credit, can also be caused also by a decrease in government, personal or investment spending.
Reflation: A fiscal or monetary policy, designed to expand a country's output and curb the effects of deflation. Reflation policies can include reducing taxes, changing the money supply and lowering interest rates.
Calculating Inflation/Deflation Rate:
I = ((APC1)/(APC2)-1) * 100
APC1: Average Production Cost for the last seven days
APC2: Average Production Cost for the period of eight to fourteen days ago
(Note: If the number is positive inflation is present, if the number is negative deflation is present)
Unemployment Rate: The percentage of the total labor force that is unemployed.
U = (A - E - M) ÷ A
A: Number of active citizens
E: Number of Employees
M: Number of Managers
Economics is a social science that studies how individuals, governments, businesses, and nations make choices on allocating scarce resources to satisfy their unlimited wants. Economics is broken down into macroeconomics, which focus on the aggregate economy, and microeconomics which focuses on individual consumers and firms.
Brief Explanation of Macroeconomics:
Macroeconomics examines economy-wide events such as changes in unemployment, national income, rate of growth, gross domestic product, inflation and price levels.
Macroeconomics is focused on the movement and trends in the economy as a whole, while in microeconomics the focus is placed on factors that affect the decisions made by firms and individuals. The factors that are studied by macro and micro will often influence each other, such as the current level of unemployment in the economy as a whole will affect the supply of workers which an specific company can hire from, for example.
Brief Explanation of Microeconomics:
The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. In particular, microeconomics focuses on patterns of supply and demand and the determination of price and output in individual markets.
Microeconomics looks at the smaller picture and focuses more on basic theories of supply and demand and how individual businesses decide how much of something to produce and how much to charge for it. People who have any desire to start their own business or who want to learn the rationale behind the pricing of particular products and services would be more interested in this area.
Macroeconomics, on the other hand, looks at the big picture (hence "macro"
😉. It focuses on the national economy as a whole and provides a basic knowledge of how things work in the business world. For example, people who study this branch of economics would be able to interpret the latest Gross Domestic Product figures or explain why a 6% rate of unemployment is not necessarily a bad thing. Thus, for an overall perspective of how the entire economy works, you need to have an understanding of economics at both the micro and macro levels.
Law of Demand:
A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease and vice versa.
Law of Supply:
A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services offered by suppliers increases and vice versa.
Supply & Demand is what determines the prices for goods and services. Running a company, business or any position dealing with finance will deal with Supply&
😉emand in one way or another.
Supply and Demand essentially says that there is a supply for each good or service and a demand. Let's pretend for a second that I'm making food and I have 20 "units" of food. In the market that I am selling there are 30 "units" of demand. Essentially, people want 30 units of food, but there are only 20.
Supply: 20
Deman
😛30
This means there is a shortage of food and therefore the price will rise. Why? Because there is less food and still the same amount of demand, people will be willing to offer a higher price for that food. I would increase my prices knowing that even if I lost potential customers, there are still more customers than products so I would end up selling all my food anyways.
This graph demonstrates how Supply and Demand interact. Notice that we were discussing a scenario where there is a shortage of supply and a surplus of demand. Let's say that after that wonderful day of selling I decide to make 30 units of food anticipating another great day. Turns out that on that day however, there is only a demand for 20 units of food.
Supply: 30
Deman
😛20
You can probably guess what is going to happen: prices will fall, because I need to get rid of that surplus product (especially since it will rot).
In a normal, functioning and efficient economy - surplus' and shortages don't last very long (unless there is a drought, disaster, etc. which would affect production), because if there is a shortage, more people will invest in that industry and balance everything out. If there is a surplus, businesses will close or the surplus will be bought due to lower prices for consumers. This means that the supply and demand would come to an "equilibrium". Equilibrium is the point where the supply and demand curves meet.
How can you tell what the correct price is? Take your costs, look at the market and see what the prices are. If prices are below your cost, that means there is more supply than demand. Obviously it gets a bit trickier than that, but you can be assured that there is too much supply when prices are below the costs of producing that good.
Lesson 2: Macroeconomics in eRepublik
Gross Domestic Product (GDP): The monetary value of all the finished goods and services produced within a country's borders in a specific time period.
GDP = C + G + L + S
C: (Cost of creating a company) * (Number of created companies)
G: the total Gold invested in company upgrades
L: (Cost of buying import license) * (Number of import licenses)
S: (Value of sales) * (Recommend Exchange Rate)
Recommended Exchange Rate (RER): recommended rate of exchange from one currency to another.
RER: 1 Gold = (Average Production Cost) * (10 Currency)
Inflation: The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
Deflation: A general decline in prices, often caused by a reduction in the supply of money or credit, can also be caused also by a decrease in government, personal or investment spending.
Reflation: A fiscal or monetary policy, designed to expand a country's output and curb the effects of deflation. Reflation policies can include reducing taxes, changing the money supply and lowering interest rates.
Calculating Inflation/Deflation Rate:
I = ((APC1)/(APC2)-1) * 100
APC1: Average Production Cost for the last seven days
APC2: Average Production Cost for the period of eight to fourteen days ago
(Note: If the number is positive inflation is present, if the number is negative deflation is present)
Unemployment Rate: The percentage of the total labor force that is unemployed.
U = (A - E - M) ÷ A
A: Number of active citizens
E: Number of Employees
M: Number of Managers
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