Chapter 1 for AED1153, AED1163 and TTD2093

1. Chapter 1
Introduction to Economics

2. Economics
A study of how people use
their limited resources to fulfil
unlimited wants

3. Basic Economics Concept
Scarcity
Choices
Opportunity
Cost
Reason: wants are always
exceeding limited resources
Land, Labour, Capital,
Entrepreneur
Everyone cannot have what
he/she wants, so they have to
choose from the available
alternatives
The second best alternative that
has to be forgone for another
choice which gives more
satisfaction

4. Basic Economic Problems
1. What to produce
2. How to produce
3. For whom to produce

5. Production Possibilities Curve
(PPC)
Definition:
Various possible combinations of goods and
services produced within a specified time with
given technology and resources.

6. Assumptions to study PPC
 Full employment and full production capacity
(full efficiency)
 The amount of resources available is fixed
 The state of technology does not change
throughout production.
 Economic only produce 2 goods
How to draw a PPC ?

7. How to Draw a PPC
 Plot all combinations views in the following
table.
Combination Shoes (unit) Rice (unit)
A 0 45
B 3 42
C 6 36
D 9 27
E 12 15
F 15 0

8. • X
• Y
• Z
• W
Unattainable
Scarcity – limited
resources
Attainable
- Unemployment
- Waste of resources
Attainable
- Efficiency
Good A
Good B

9. Factors that influence the shift of
the PPC
1. Economic growth
2. Technological advances
3. Population

10. Shape of PPC
Concave Linear Convex
OC is constant
/ fix
OC is
increasing
OC is
decreasing