Economics NEEDS - are the necessities that a person must
- the study of how we make decisions in a world have in order to survive
where resources are limited
- the social science that studies the human Scarcity – it is a commodity or service being in
behavior of people in the society on how they short supply
make their choices
- the branch of knowledge concerned with the Goods – anything that yields satisfaction to
production, consumption and transfer of wealth. someone
- Came from the Greek word, oikos which WANTS: are the desire that people have
means household and nomus which means
management, oroikonomus/oikonomia which Economic Resources- inputs used in the
means household management production of goods and services.
Economics as a social science - It is the study Wealth – refers to anything that has a functional
of how individual make choices in using the value which can be traded for goods and
scarce resources that are allocated to fulfill the services
infinite wants of consumers.
Economic goods – cover goods, services,
Adam Smith (1723 – 1790) products and the like that have price and are sold
- Known as the father of modern economics in a market
- Wrote the first and most important books about
economics, An Inquiry into the Nature and Exchange – this is the process of trading goods
Causes of the Wealth of Nations (1776) and/or services for money and/or its equivalent.
- Smith believed in “free market” SCARCITY
- Smith suggested that a laissez-faire (don’t - a condition where there is insufficient
interfere) approach should be followed, leaving resources to satisfy the unlimited wants and
customers and producers to make their own needs of a population. Scarcity may be relative
decisions and absolute
Alfred Marshall Relative scarcity – is when good is scarce
- He is a leading 19th-century English economist compare to its demand.
- he believes that economics is “a study of
mankind in the ordinary business of life; it Absolute Scarcity – is when supply is limited
examines that part of individual and social
action which is most closely connected with the
attainment, and with the use of the material
requisites of well being.
- emphasized that the price and output of a
goods are determined by both supply and
demand: the two curves are like scissor blades
that intersect at equilibrium.
Factors of Production Opportunity Costs
- The cost of the next best use of your time or
Land money when you choose to do one thing rather
- natural resources available for production than another is opportunity cost.
- renewable resources: those that replenish
- non-renewable resources: cannot be replaced Trade Offs
- Decisions involve tradeoffs. When you make a
Labor choice, you give up an opportunity to do
- physical and mental effort of people used in something else.
production - The highest-valued alternative you give up is
the opportunity cost of your decision.
Capital
- all non-natural (manufactured) resources that Branches of economics
are used in the creation and production of other
products Macroeconomics
– is a division of economics that is concerned
Enterprise (Entrepreneurship) with the overall performance of the entire
- refers to the management, organization and country
planning of the other three factors of production
- studies the economic system as a whole rather
Rent than individual economic units
- a tenant's regular payment to a landlord for the
use of property or land. - focuses on the overall flow of goods and
- the amount paid by a hirer of personal property resources and studied the cause of changes in
to the owner for the use thereof the aggregate flow of money
- to grant the possession and enjoyment of in - about the nature of economic growth,
exchange for rent employment, the expansion of productive
capacity and the growth of national income.
Wage
- a payment usually of money for labor or Microeconomics
services usually according to contract and on an – is concerned with the behaviour of individual
hourly, daily, or piecework basis entities such as consumer, producer, and
resource owner.
Interest
- the profit in goods or money that is made on - more concerned on how goods flow from the
invested capital business firm to the consumer and how
resources move from resource owner to the
Profit business firm.
- the excess of returns over expenditure in a
transaction or series of transactions especially : - also concerned with the process of setting price
the excess of the selling price of goods over their of goods that is also know as PRICE THEORY
cost - studies decision and choices of individual unit
and how these decision affects the price of the
good in the market
