2. ECONOMICS
Economics is the study of how societies use scarce resources
to produce valuable commodities and distribute them among different
people
Smith defined economics as “an inquiry into the nature and
causes of the wealth of nations.”
Ecnonmic is stated as dismal science
3. Themes of Economics
Some of the discipline's major themes
include economic methodology,
development economics
Four key economic concepts—
scarcity, supply and demand, costs
and benefits, and incentives—can
help explain many decisions that
humans make.
4. SCARCITY
Scarcity refers to the basic economic problem, the gap
between limited – that is, scarce – resources and theoretically
limitless wants. This situation requires people to make decisions
about how to allocate resources efficiently, in order to satisfy basic
needs and as many additional wants as possible.
5. EFFICIENCY
Efficiency denotes the most effective use of a society's
resources in satisfying peoples wants and needs.
Economic efficiency is when all goods and factors of
production in an economy are distributed or allocated to their
most valuable uses and waste is eliminated or minimized.
6. THE THREE PROBLEMS OF
ECONOMIC ORGANIZATION
What commodities are produced
How these goods are made
For whom they are produced
7. SOCIETY’S CAPABILITIES
Takes the initiative in combining the resources of land,
labour, and capital
Makes strategic business decisions
• Is an innovator
• Commercializes new products, new production
techniques, and even new forms of business
organization
• Takes risk to get profits
8. BROAD CATEGORIES
Land - generally nature resources -represents the gift of nature to our
productive processes.
Labour- consist of the human time spent in production
Capital- resource from the durable goods of an economy, produced
in order to produce yet other goods.
9. INPUTS
Input are commodities or services that are used to produce
goods and services. An economy uses its existing technology to
combine inputs to produce outputs.
10. OUTPUTS
Outputs are the various useful goods or services
that result from the production process and are either
consumed or employed in future production.
11. MICRO ECONOMICS
Micro economics the branch of economics which
today is concerned with behaviour of individual entities
such as market, firms, and households.
12. MACROECONOMICS
Macroeconomics is a branch of economics that
studies how an overall economy—the market systems
that operate on a large scale—
behaves. Macroeconomics studies economy-wide
phenomena such as inflation, price levels, rate of
economic growth, national income, gross domestic
product (GDP), and changes in unemployment
13.
14.
15.
16. production possibility curve (PPC) –
The production possibility curve can be defined as a curve
which shows the maximum combination of output that the
economy can produce using all the available resources.
19. PUTTING THE PPF TO WORK
Poor nation High income nation
A A
B
F
Luxuries
(
Cars,
Stereos,…)
Luxuries
(
Cars,
Stereos,…)
Necessities ( foods….)
Necessities ( foods….)
20.
21. PRODUCTIVE EFFICIENCY
Productive efficiency occurs when an economy cannot
produce more of one good without producing less of another good.
this implies that the economy is on its production possibilities
frontier.
23. ECONOMIC GROWTH
Economic growth is an increase in the total output of the
economy. It occurs when a society acquires new
resources, or when it learns to produce more using
existing resources.
The main sources of economic growth are capital
accumulation and technological advances.
24. •Outward shifts of the curve represent
economic growth.
• An outward shift means that it is
possible to increase the production of
one good without decreasing the
production of the other.
From point D, the economy can
choose any combination of output
between F and G.
25. EXTERNALITY
Externality
A by-product of a transaction that affects
someone not immediately involved in the transaction.
Positive Externalities
Economic activities that have positive effects on
unrelated third parties are considered positive
externalities.
Negative externalities
Negative externalities are defined as economic
activities that have negative effects on unrelated third
parties.
