GOKUL TECHNICAL CAMPUS HANSABA COLLEGE OF ENGINEERING & TECHNOLOGY,SIDHPUR SUB.-Engineering Economics & Management BRANCH-ELECTRICAL CLASS-C1, YEAR-2014 TOPIC- INTRO. TO ECONOMICS 1)PANDYA BRUGUU= )CHAUHAN VIVEK= )CHAVDA RONAK J.= )CHORASIYA DIXIT B.= )DESAI PINAK.= )PATEL PIYUSH= )PRAJAPATI ANKIT M.= )PRAJAPATI BHAVIN N.= )Chaudhary Prem = )Joshi Dhaval =

The Economic Problem Opportunity Cost Production Possibility Frontiers

The Economic Problem Unlimited Wants Scarce Resources – Land, Labour, Capital Resource Use Choices A wind farm. Copyright: iStock.com

The Economic Problem What goods and services should an economy produce? – should the emphasis be on agriculture, manufacturing or services, should it be on sport and leisure or housing? How should goods and services be produced? – labour intensive, land intensive, capital intensive? Efficiency? Who should get the goods and services produced? – even distribution? more for the rich? for those who work hard?

Production Possibility Frontiers Show the different combinations of goods and services that can be produced with a given amount of resources No ‘ideal’ point on the curve Any point inside the curve – suggests resources are not being utilised efficiently Any point outside the curve – not attainable with the current level of resources Useful to demonstrate economic growth and opportunity cost

Production Possibility Frontiers Capital Goods Consumer Goods Yo Xo A B Y1 X1 Assume a country can produce two types of goods with its resources – capital goods and consumer goods If it devotes all resources to capital goods it could produce a maximum of Ym. If it devotes all its resources to consumer goods it could produce a maximum of Xm Ym Xm If the country is at point A on the PPF It can produce the combination of Yo capital goods and Xo consumer goods If it reallocates its resources (moving round the PPF from A to B) it can produce more consumer goods but only at the expense of fewer capital goods. The opportunity cost of producing an extra Xo – X1 consumer goods is Yo – Y1 capital goods.

Production Possibility Frontiers Capital Goods Consumer Goods Yo Xo A.B.B C Y1 X1 Production inside the PPF – e.g. point B means the country is not using all its resources It can only produce at points outside the PPF if it finds a way of expanding its resources or improves the productivity of those resources it already has. This will push the PPF further outwards.

Positive and Normative Economics Health care can be improved with more tax funding Pollution control is effective through a system of fines Society ought to provide homes for all Any strategy aimed at reducing factory closures in deprived areas would be helpful Positive Statements: Capable of being verified or refuted by resorting to fact or further investigation Normative Statements: Contains a value judgement which cannot be verified by resort to investigation or research

Economics SOL 3.7 SOL 3.8 SOL 3.9 SOL 3.10

Exchange To trade one thing for another. Example: I want to trade in my green disk for a blue one. Barter The exchange of goods or service without money. Example: I’ll give you my cake for your ice cream.

Three Kinds of Money CashChecksCredit Cards

Needs vs. Wants Needs – what people must have to live. Food Clothing Shelter Wants – the things we would like to have, but can live without.

Economic Choice You make an economic choice when you only have money for certain items, not all. Example: I do not have enough money for both popcorn and a pretzel. I must choose, so I buy the popcorn. That is my economic choice. YUM!

Opportunity Cost Definition – the cost expressed in terms of the next best alternative sacrificed Helps us view the true cost of decision making Implies valuing different choices

Opportunity Cost Opportunity cost what you must give up when you make an economic choice. Example: I chose the popcorn, so I have to give up the pretzel. That is my opportunity cost.

Supply and Demand Supply is the amount of a good or service available. Demand is what people are willing and able to buy. I would like to buy one candy cane, please.

Scarcity - Sometimes there is not enough of something to go around. That item is scarce. Oh no! Ice cream is scarce! “I scream, you scream, we all scream for ice cream! La, la, la, la, la!” The Ice Cream Singers

What can I do with my money? Spend it Save it Invest it Give people money to use to make more moneys, like in stocks and bonds.

Goods and Services Goods Services

Three types of resources work together in our economy Human Resources Capital Resources Natural Resources

Natural Resources are things we get from nature. Oil CoalTrees Water

Producers Producers make goods or provide services.

Consumers Consumers use or buy goods and services.

Economic Specialization Individuals or groups who concentrate on one type of good or service. Apple farmerCarpenter