Basics Of Economics Prepared By: Shaikh Mohseen

Introduction Economics is the study of how economic agents or societies choose to use scarce productive resources that have alternative uses to satisfy wants which are unlimited and of varying degrees of importance Prepared By: Shaikh Mohseen

Limited Resources General Listing of Desired Economic Goods and Limited Resources Economic Goods (Wants)Limited Resources Food (bread, milk, meat, eggs, vegetables, coffee, etc.) Clothing (shirts, pants, blouses, shoes, socks, coats, sweaters, etc.) Household goods (tables, chairs, rugs, beds, dressers, television sets, etc.) Space exploration Education National defense Recreation Leisure time Entertainment Clean air Pleasant environment (trees, lakes, rivers, open spaces, etc.) Pleasant working conditions More productive resources Land (various degrees of fertility) Natural resources (rivers, trees, minerals, oceans, etc.) Machines and other human-made physical resources Non-human animal resources Technology (physical and scientific “recipes” of history) Human resources (the knowledge, skill, and talent of individual human beings) Prepared By: Shaikh Mohseen

Economic Rationality Economics assumes rationality on the part of its subjects like consumer, producer and seller. Rationality implies acting objectively, keeping in view the ends and means, the objectives and constraints. In the Decision-making context, a rational behavior implies the following: ◦ First, all possible courses of action are known to you. ◦ Secondly, you are able to separate all such courses of action into two categories – feasible and infeasible. ◦ Thirdly, based on the available information, you are in a position to assess the consequences of following a particular feasible course of action out of a given set of alternatives. Fourthly, you can rank the alternatives in terms of priorities. ◦ Lastly, you choose that course of action, which occupies the highest position in the order of priority. Prepared By: Shaikh Mohseen

Alternative Economic Systems Every economy faces three fundamental questions in its functioning. These are: ◦ What goods and services are to produce and in what quantity? ◦ How to produce those goods and services? i.e. how the scarce resources are optimally allocated? and ◦ How the goods and services so produced are distributed among the households? Prepared By: Shaikh Mohseen

To Be Continued……. Prepared By: Shaikh Mohseen