Introduction to Economics

What is Economics? A social science that studies and influences human behavior

The Foundation of Economics The “Father” Adam Smith (1723 - 1790) Author of the famous book "An Inquiry into the Nature and Causes of the Wealth of Nations"

ECONOMICS MICRO MACRO

Micro Economics Micro Economics studies how the individual parts of the economy make decisions to allocate limited resources

Satisfaction of Individual Human ‘wants’

Macroeconomics studies about the functioning of the economy as a whole

Satisfaction of collective Society ‘wants’

INSATIABLE WANTS + FINITE RESOURCES = THE NEED TO ECONOMISE

The Factors of Production Labour Capital Land Organization Product

LAND – all natural resources LABOR – human effort involved in production CAPITAL – machinery/equipment for manufacturing other Goods & Services - expenditure on capital is ‘capital investment’

Fourth Factor of Production – Enterprise

A plot of land could have several possible uses: develop shopping centre develop office block develop private housing estate

The Economic Problem Unlimited Wants Scarce Resources – Land, Labour, Capital Many Uses of Resources Choices

Opportunity Cost The cost of anything in terms of other things given up or sacrificed.

The basic economic questions: (1) WHAT to produce (2) HOW to produce it (3) WHO shall receive it