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Introduction To Economics

This document provides an introduction to economics. It defines economics as the study of how individuals and societies choose to use scarce resources. It discusses key economic concepts like scarcity, opportunity costs, and types of scarcity. It also outlines microeconomics and macroeconomics and provides examples of micro and macroeconomic concerns. Finally, it discusses reasons for studying economics like learning economic thinking, understanding society, and being an informed citizen.

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37 views10 pages

Introduction To Economics

This document provides an introduction to economics. It defines economics as the study of how individuals and societies choose to use scarce resources. It discusses key economic concepts like scarcity, opportunity costs, and types of scarcity. It also outlines microeconomics and macroeconomics and provides examples of micro and macroeconomic concerns. Finally, it discusses reasons for studying economics like learning economic thinking, understanding society, and being an informed citizen.

Uploaded by

JAGATHESAN
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CHAPTER 1

INTRODUCTION TO
ECONOMICS

Dr. Nurul Syakima Binti


Mohd Yusoff
What is Economics
Economics The study of how individuals and societies
choose to use the scarce resources that nature and
previous generations have provided to produce,
distribute and consume goods and services.

Economics is called a social or behavioral science


because is concerned with human behavior.,
economics, therefore is a social or behavioral science
that studies how people allocate scarce resources in
order to satisfy their needs.
Scarcity, Choice and Opportunity
Costs
• The study of economics begins with scarcity. Scarcity refers to the
idea that there is not enough of something to satisfy everyone who
would like that something. People have unlimited wants—they
always want more than they have or can.

• Opportunity costs arise because resources are scarce. Scarce simply


means `limited. Thus, a major concept in economics is choice and
opportunity cost. Resources are scarce, and individuals and
societies must choose among competing uses of limited resources.
Once a choice is made, that which is given up or not selected is the
trade-off, or opportunity cost, that one must pay for a particular
choice.

• The best alternative that we forgo, or give up, when we make a


choice or a decision is called the opportunity cost of that decision.
Types of scarcity
 Physical scarcity - where resources are available only in finite quantity.

 Geopolitical scarcity - where resources are unequally distributed such that


some communities or countries have to depend on others for their supply

 Socio-economic - scarcity where the purchasing power and property


rights over resources are unequally distributed between and within
societies.

 Environmental scarcity - were previously abundant and naturally


renewable but are becoming scarce because of human failure to adopt
sustainable methods to management, and is usually caused by
environmental degradation. Environmental scarcity can result from the
overuse of a renewable resource
The Scope of Economics
The study of economics can be broken into two main categories:
• microeconomics The branch of economics that examines the
functioning of individual industries and the behavior of
individual decision-making units—that is, firms and
households.
• Microeconomics looks at the individual unit—the household,
the firm, the industry. It sees and examines the “trees.”

• macroeconomics The branch of economics that examines the


economic behavior of aggregates—income, employment,
output, and so on—on a national scale.
• Macroeconomics looks at the whole, the aggregate. It sees and
analyzes the “forest.”
Examples of Microeconomic and Macroeconomic
Concerns
Division
of Economics Production Prices Income Employment
Microeconomics Production/output Prices of individual Distribution of Employment by
in individual goods and services income and individual
industries and Price of medical care wealth businesses and
businesses Price of gasoline Wages in the industries
How much steel Food prices auto industry Jobs in the steel
How much office Apartment rents Minimum wage industry
space Executive Number of
How many cars salaries employees in a firm
Poverty Number of
accountants

Macroeconomics National Aggregate price level National income Employment and


production/output Consumer prices Total wages and unemployment in
Total industrial Producer prices salaries the economy
output Rate of inflation Total corporate Total number of jobs
Gross domestic profits Unemployment rate
product
Growth of output
Why Study Economics?
1. To Learn a Way of Thinking

– To know that there is opportunity cost for every


decision made
– To learn that there is No Free Lunch. Buyer and
seller are busy interacting and bargaining to get
the best out the market. The market is efficient -
any profit opportunities are eliminated almost
instantaneously or more appropriately, large
profit opportunities are rare.
2. To Understand Society

– Another reason for studying economics is to


understand society better. Past and present economic
decisions have an enormous influence on the
character of life in a society. The current state of the
physical environment, the level of material well-being,
and the nature and number of jobs are all products of
the economic system. What you see before you is the
product of millions of economic decisions made over
hundreds of years.
3. To Be an Informed Citizen

– To be an informed citizen requires a basic


understanding of economics.
Thank You

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