WELCOME TO ECONOMICS

CLASS.
Introduction to Economics

BELL WORK
Define Economics
 SOCIAL CONTRACT
1. NO LATENESS TO CLASS.
2. GET ALL WRITING MATERIALS READY BEFORE
THE COMMENCEMENT OF LESSON.
3. SLEEPING IN THE CLASS IS UNACCEPTABLE.
4. NO EATING OR CHEWING IN THE CLASS.
5. WAIT FOR TURN BEFORE YOU TALK.
6. ASSIGNMENTS MUST BE SUBMITTED ON TIME.
7. ALL RELEVANT CONTRIBUTIONS ARE VALID.
8. NO USE OF ABUSIVE WORDS.
9. FIGHTING DURING LESSON IS PROHIBITED.
 ASSIGNMENT
Distinguish between the following:
1. Economic resources and non-economic resources
2. Economic rent and quasi rent
3. Economic goods and non-economic goods
4. Transfer payment and Transfer earning
5 . Distinguish between positive and normative
reasoning
 Read-up Assignment
Define economic problems
Explain any 4 Economic problems and 4
factors that determine each problem
CLASS EXPECTATION
 Meaning of Economics
The subject Economics has no specific
definition. It has been defined in many ways by
various economists as a social science which
studies human beings and their behaviour. Some of
the experts in the subject include the following:
• Adam Smith
• Alfred Marshal
• John Stuart Mill
• H.J. Davenport
• A.C. Pigou and
• Professor (Lord) Lionel C. Robbins.
 Adam Smith saw Economics as “An
inquiry into the nature and causes of the
wealth of the nations.” To him Economics is all
about the making of wealth.

Alfred marshal defined it as “A study of

mankind in the ordinary business of life.”

John Stuart Mill views it as “The practical

science of production and distribution of
wealth.”
 H. J. Davenport looked at economics as the
science that treats phenomena from the stand point
of price.

A. C. Piguo defined economics as “science of

material welfare.” To him, economics is all about
acquiring material wealth which improves or eases
the welfare of human beings.

Professor (Lord) Lionel C. Robbins. He

defined economics as “The science which studies
human behaviour as a relationship between
ends and scarce means which have alternative
uses.”
 Nature and Scope of Economics
Economics is regarded as a science
because it adopts the scientific method. The
scientific method involves the following steps:
1. Observation
2. Formulating a hypothesis.
3. Collection of data
4. Organizing or analysing the data
5. Formulating laws
6. Testing the laws
7. Prediction on the basis of the laws
Scientific method includes the following:
i. Inductive method: This is the process of
making generalized decisions after
observing, or witnessing, repeated specific
instances of something. That is, reasoning
from particular to general. For example,
‘Ajebo wears expensive shoes in the last few
days.
Therefore, all boys will wear expensive shoes
tomorrow.’
Deductive method: This is the process of taking
the information gathered from general
observations and making specific decisions
based on that information. That is, reasoning
from general to particular. Example,
‘All Nigerians are handsome.
Olu is a Nigerian.
Therefore, Olu is handsome.’
 POSITIVE AND NORMATIVE ECONOMICS
Positive economics is based on fact. That is, it is
based on “what is” and not “what ought to be.” for
example, government Medicaid for low-income
families increases the cost for all taxpayer

While
Normative economics is based on the value
economic fairness, or what the economy “should be”
or “ought to be.” For example, working citizens should
not pay for hospital care. Labourers should receive
greater parts of capitalist profit.
Economics is also regarded as a social
science because it studies human behaviour.
 Basic Concepts of economics
The basic concepts or elements of economics are:
Wants, Scarcity, Scale of preference, Choice and
opportunity cost

Wants
Want may be defined as insatiable desire by
human beings to own goods or services that give
satisfaction. Human wants are many, and are
usually described as insatiable because the means
of satisfying them are limited or scarce.
Scarcity
Scarcity is defined as the limited supply of
resources which are used for the satisfaction
of unlimited wants. For instance, ……….
Scale of preference
Scale of preference is defined as a list of
unsatisfied wants arranged in order of their relative
importance or priority. For example, ………..

Importance of scale of preference

1. Ranking of needs
2. Financial prudence
3. Identification of highest priority
4. Rational choice
5. Efficient utilization of limited resources
6. Optimum allocation of resources
7. Maximization of satisfaction
 ASSIGNMENT 1
The table below shows the scale of
preference of a student- Mr. Gold whose
disposable income is $7.
Items needed Price $
Textbook 5
Shirt 2
Shoes 3
Trousers 3
Notebook 1
1. What will Mr. Gold spend his money on?
2. Explain your answer in (1)
3. What is the opportunity cost of Mr. Gold’s
decision in (1)
4. Explain your answer in (3)
5. If Mr. Gold’s disposable income increases to
$10, what will he be spend it on?
6. What is the opportunity cost of the decision
in (5)
Choice
Choice can be defined as a system of selecting or
choosing one out of a number of alternatives. Choice arises
as a result of numerous human wants and the scarcity of the
resources used in satisfying these wants. For example, …….
Opportunity Cost
It refers to the wants that are left
unsatisfied in order to satisfy another more
pressing need. For instance, ………….

Importance of opportunity cost

i. It helps individual in deciding how to spend
his scarce resources/income most
effectively
ii. Efficient use of scarce resources
iii. It guides businessmen in deciding how best
to use the available productive resources
iv. Firms also use opportunity cost to determine
whether to use labour intensive or capital
intensive technique of production.
v. Government uses it to prepare statement of
proposed expenditure and estimated
revenue for a particular year
vi. It helps government in deciding how best to
use revenue
 Why Do We Study Economics
i. We learn how best to use our limited
resources with minimum waste and to
maximize satisfaction.
ii. It equips individual with the tools of
economic analysis, which will enable him to
understand current issues and problems
confronting society.
iii. It enable individuals to understand the
economic policies of government.
iv. It assists planners in planning for
development.
v. It helps to solve basic economic problems of
what to produce, how to produce and for whom
to produce.
vi. It assists the producer/firm to apply
appropriate marketing strategies which would
enable profit maximisation with minimum cost
 Branches of Economics
i. Micro-economics
ii. Macro-economics

i. Micro-economics is the branch of

economics which deals with smaller units or
components of the economy.
 Merit of Micro-economics
i. Understanding the working of the economy
ii. Making of economic policies
iii. Knowledge of vibrant sector
iv. Development of economic tools
ii. Macro-economics
This refers to the branch of economics
which deals with larger units or aggregate
of the economy.
Merits of Macro-economics
i. Even distribution of income
ii. Full employment
iii. Provision of goods and services
iv. Balance of payment
v. Increase in GDP
vi. Stability of price
 ECONOMICS TERMINOLOGY
1. ECONOMIC RESOURCES: These are
resources which are scarce relative to the
demand for them and they have prices. E.g.
land, labour, capital and entrepreneur.

2. NON-ECONOMIC RESOURCES: These

are resources that are not scarce relative to
the demand for them. Air, rain and wind
3. ECONOMIC RENT: It is the payment made
to an owner of factors of production.
4. QUASI RENT: This is the payment made for
any factor (e.g. patent/copyright, land) that are
temporary fixed in supply

5. Transfer payment: Payment made to an

individual which nothing is expected in return
for it. For example, gift, scholarship etc.
6. Transfer earning: This is a payment
sufficient to keep labour on a job instead of
opting for another job.
7. ‘Ceteris Paribus’ means ‘all things
being equal’