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Thread: Economics 101

  1. #1
    Alexander the Terrible yenom's Avatar
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    Default Economics 101

    Given the many unanswered questions I have, I have decided to start an economics thread of my own. Anyone can post their queries about economics here, and the rest of us will do our best to answer.

    These are my unanswered questions:

    (1)What drives economic growth of a country?
    (2)does increase of money supply means the increase of wealth of an economy?
    (3)If everyone loses money in the economy, why are some people rich and some people poor?
    (4)How does individual business activity stimulate growth in an economy?
    (5)How does 10% of the population copntrol 90% of our wealth?
    (6) What is the market ? Is it invisible? how do you know what the demand of the market is? Where are the buyers, or people who pay money?
    The fear of poverty turns people into slaves of money.

    "In this Caesar there are many Mariuses"~Sulla

    Conquer your inner demons first before you conquer the world.

  2. #2
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    Well, I don't have the answers to all of those questions, but I think I know somthing about question 4.
    (4)How does individual business activity stimulate growth in an economy?
    Basicaly, an individual business generally makes money by offering a product or service, the more people buy this product or service, the more people the business can employ, which inturn expands their ability to sell more of it. The people who are employed by the business thus are able to spend the money they make on products and services offered by other business', and it just keeps going like that.

    Does that answer your question? I get the feeling you already knew that, but hopefully I've made it clearer.

  3. #3
    Senior Member ptgatsby's Avatar
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    (1)What drives economic growth of a country?

    Technical innovation and/or growth of the workforce.

    (2)does increase of money supply means the increase of wealth of an economy?

    Not exactly, but it tends to prompt an increase in the economy as people respond to the higher wages->costs. Typically higher employment, so it generates more material wealth.

    (3)If everyone loses money in the economy, why are some people rich and some people poor?

    No one loses money in the economy, exactly. The economy is made up of workers and consumers, essentially, which are the same thing. A loss of money means reduced amount of purchasing power (see: #1)

    (4)How does individual business activity stimulate growth in an economy?

    They hire people; they pay people; people spend money;businesses make money;they hire people; they pay people...


    (5)How does 10% of the population copntrol 90% of our wealth?

    Wealth accumulates wealth, due to the regressive nature of cost of living. Lots of other reasons too, but that's the one I can describe easily


    (6) What is the market ? Is it invisible? how do you know what the demand of the market is? Where are the buyers, or people who pay money?

    The market is made up of buyers and sellers: it is invisible in the sense that many things in life are "invisible" - emotions, logic, etc. Less so in many ways. Tangible markets are obvious, but the market is just the interaction of buyers and sellers.

    Demand is, as it always is done in economics, the result of people wanting to buy. The demand is determined by the equilibrium point between supply and demand, as in, by price.

    Don't understand the question about buyers - buyers are... buyers. Those that buy. They are where they are, exist when actors can... buy.

  4. #4
    pathwise dependent FDG's Avatar
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    Quote Originally Posted by untypable View Post
    G
    (1)What drives economic growth of a country?
    If it's per capita growth, it can mostly be traced back to increases in the average productivity of the workers. If it's total growth, then we must factor in the increase in population.

    (2)does increase of money supply means the increase of wealth of an economy?
    It's disputable. There is no consensus on the matter. It increases the wealth when it serves to change business' expectations so that they can hire more workers and invest money, thus generating wealth; however, it also causes a decrease in wealth of those with a fixed wage and a decrease in the value of the money held in completely liquid form.

    (3)If everyone loses money in the economy, why are some people rich and some people poor?
    Because what counts is the net balance; it's like asking: if everybody expends calories every minute, why are some people fat and some slim? Because the former spend less calories than they eat.

    (4)How does individual business activity stimulate growth in an economy?
    Through consumption and investment, just like everything else (hiring other workers can be considered as a form of either, depending on how long the contract of the worker is set to last).

    (5)How does 10% of the population copntrol 90% of our wealth?
    Mostly because there tends to be a threshold over which people are able to save and invest, and under which people must expend most of their income. If you can invest, you start a positive-feedback cycle where at time t+1 you have more money to invest, thus at time t+2 you have even more, etc (assuming those investments were good, of course).

    (6) What is the market ? Is it invisible? how do you know what the demand of the market is? Where are the buyers, or people who pay money?
    The market is the ensamble (I like to think about it as an analoguous of a statistical ensamble of particles in physics) of buyers and sellers, at its primest level. The buyers are everywhere, obviously, anything that requires a person to pay for something qualifies the said person as a "buyer".

    EDIT: ptgatsby speaks about technological innovation driving growth; I speak about increases in productivity; they're basically the same phenomenon, since increases in productivity are usually generated by technological innovation.
    ENTj 7-3-8 sx/sp

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    Senior Member matmos's Avatar
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    Quote Originally Posted by untypable View Post
    (5)How does 10% of the population copntrol 90% of our wealth?
    Could you supply a source for this, please. Thanks.

    Ref: Pareto principle - Wikipedia, the free encyclopedia

    Edit: Oddly, IlyaK1986 used this very statistic the other day. Are you related?

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    pathwise dependent FDG's Avatar
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    It's 20 percent controlling 80 percent of the wealth, in general, for developed nations, so it's impossible for it to be 10 percent controlling 90 percent; but the gist of the idea was somehow correct.
    ENTj 7-3-8 sx/sp

  7. #7
    Alexander the Terrible yenom's Avatar
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    You only need to answer one question, not all.
    But thnaks for the response, everyone.


    I need some more info on this

    Why does people always buy certain goods and never buy others?

    What motivate people to buy these goods. and what qualities does these goods have?

    P.S Nah, Ilyak is a J, I am a P, so we are not related.
    The fear of poverty turns people into slaves of money.

    "In this Caesar there are many Mariuses"~Sulla

    Conquer your inner demons first before you conquer the world.

  8. #8
    Alexander the Terrible yenom's Avatar
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    i really want to understand the intangible market and demand.
    The fear of poverty turns people into slaves of money.

    "In this Caesar there are many Mariuses"~Sulla

    Conquer your inner demons first before you conquer the world.

  9. #9
    Senior Member ptgatsby's Avatar
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    Quote Originally Posted by untypable View Post
    Why does people always buy certain goods and never buy others?
    I think you have to explain why this doesn't make sense.

    Do you own video games? Every console? If so, do you also own artwork? And if so, do you also own barbies (dolls)?

    No one can have everything and no one wants everything. We have constraints and wants, and... that's it.

    What motivate people to buy these goods. and what qualities does these goods have?
    It cannot be generalised, except to say that people are motivated to buy what they want. The only common quality that the good would have is "people want it".

    Demand is simply demand. A measurement of how much people want it. That translates to "market demand", a representation of how much people want it at a given price. Price matters because it represents a sort of general comparison to other goods - if you spend it on this, then you can't spend it on other stuff.

  10. #10
    Dhampyr Economica's Avatar
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    (I keep seeing this thread in New Posts and thinking someone posted in my blog only to be disappointed when I take in the word in its entirety. )

    OP: If you're really interested in understanding these things, I suggest you invest in an introductory economics textbook instead of trying your luck on an internet forum (with all due respect to ptgatsby ). Principles of Economics by Mankiw is the one they use at my university.

    (Happy now, Haight? )

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