1. ECONOMICS. ECONOMICS.

2. ECONOMICS IS The study of the production, distribution and consumption of wealth in the society.

3. Another definition on the subject: "Economics is a social science that studies human behaviour as a relationship between ends and scarce means which have alternative uses"

4. The purpose of any Economic Activity is the production of goods and services to satisfy consumers’ needs and wants for survival and also for a better living standard.

5. The Basic Economic Problem The basic economic problem is about scarcity and choice. Due to the existence of a limited amount of resources to produce an unlimited amount of goods and services all societies face the problem of having to decide

6. WHAT TO PRODUCE? HOW TO PRODUCE? FOR WHOM TO PRODUCE?

7. Thus, scarcity arises because people have unlimited wants and resources are limited. Because of scarcity, various economic decisions must be made to allocate resources efficiently.

8. Scarcity leads to the concept of Market Value. When the supply of a good or service is low, the market value will be high. WHEREAS Goods and services that are in large supply will have a lower market value because supply meets the Consumers’ demand.

9. Thus, The concept of Market Value is based on individual preferences and choices.

10. People express their preferences through their tradeoff.

11. Economic Systems An economic system is a network of organizations used by a society to ANSWER the basic QUESTIONS of what, how and for whom to produce.

12. There are four types of economic systems.

13. 1- The Traditional ECONOMY In this system decisions about what, how and for whom to produce are based on custom and tradition. Land is owned in common. Private property is not well defined.

14. 2- Free market economy: In this system  An increase in demand raises price and encourages firms to switch additional resources into the production of that good or service.  The amount of products consumed depends on consumers’ income.  The government has a limited role. It just protects the property rights of people and businesses and the value of currency.

15. 3- Planned or command economy In this system resources are owned by the government. It allocates them, and sets production targets and growth rates. Income and wealth distribution are decided by the state.

16. 4- Mixed economy: In this system  Some resources are owned by the public sector (government) and others by the private sector.  The public sector supplies merit goods and intervenes in markets just to correct market failure.

17. OPORTUNITY COST It measures the cost of any choice in terms of the next best alternative forgone

18. Examples of OC EXAMPLE1 A person is paid £6 per hour to work at a local supermarket. In case, he chooses to take a day off from work he loses £48 from having sacrificed eight hours of paid work.

19. The opportunity cost of going to college is the money he would have earned if he worked instead. On the one hand, he loses four years of salary while getting his degree. But on the other hand, he will earn more during his future career, thanks to his degree. Thus Working with a degree conpensates the four years’ lost wages.

20. EXAMPLE 2 If a gardener decides to grow carrots, his opportunity cost is the alternative crop that might have been grown instead. (potatoes, tomatoes….)

21. SECTORS OF PRODUCTION IN THE ECONOMY

22. 1- Primary sector It involves the extraction of natural resources e.g. agriculture, forestry, fishing,and mining.

23. 2- Secondary sector This sector involves the production of goods. It is the transforming of materials produced by the primary sector. e.g. manufacturing and the construction industry

24. 3- Tertiary sector It is the sector of the economy which provides services such as banking, finance, insurance, retail, education, travel and tourism.

25. 4- Quaternary sector It is involved with information processing e.g. education, research and development