economics presentation

1. INTRODUCTION
TO ECONOMICS

2. At the end of this topic, student should be
able to:
1. To describe economics theories
2. To discuss basic economics concepts
3. To discuss economics systems
Topic Learning Outcomes

3. Economics
Microeconomics Macroeconomics
Study of how
people use their
limited resources
to fulfill unlimited
wants and need.
study of small individual economic
units.
ex: households, firms and industries
making choices.
studies the aggregate behavior of
the entire economy
ex: unemployment, inflation, GDP,
international trade, etc
Economists study
the choices we make
and also the
consequences of
these choices
What is Economics?

4. • Sometimes called factors of production
• Used in the production of goods and services
• Classified as land, labor, capital, and enterprise
• Scarce relative to the unlimited wants
Economics Resources

7. 1. Scarcity
economic resources are limited compared to wants which
are unlimited
scarcity – impossible to satisfy our unlimited
wants with the limited resources
wants always exceed the limited resources
Peoples’ wants are greater than the economy’s ability to
produce desirable goods & services
Basic Economics Concepts

8. 1. Scarcity Cont.
• arises because human wants for goods & services are
infinite but the resources required to produce them are
finite.
• a relative concept – resources are not scarce in themselves,
they are scarce in relation to the demands placed upon
them
• a universal problem as it applies to all economies
• no country in the world has enough resources to produce
enough goods & services to completely satisfy all the wants
of its people.
• always exists and cannot be eliminated, it can be only
reduced.
Basic Economics Concepts

9. 2. Choice
• because of scarcity, we cannot fulfill all wants and must
choose from the available alternatives.
• Choice is necessary because resources can be used in
lots of ways to make different goods & services.
• The only way unlimited wants can be reconciled with
limited resources is through choice
• As there are insufficient resources to satisfy all wants,
choices must be made at all levels i.e. individual
consumers, producers, and the government.
• As scarcity is universal, everyone must choose.
SCARCITY  CHOICES
Basic Economics Concepts

10. 3. Opportunity Cost
 the second best alternative forgone after making a choice.
 the second best foregone alternative.
 Example:
Government has a piece of vacant land to be used
either to build a hospital, a school, or a sports center
(scarcity).
Because the land is enough for only one project, then
choice must be made from the alternatives available
(choice).
The government decides to build a hospital, so the
school must be forgone/sacrificed (opportunity cost)
Basic Economics Concepts

11. 3. Opportunity Cost Cont.
• Every choice involves a sacrifice or trade-off
• Choosing more of one thing means giving up something
else in exchange
• It is a direct result of scarcity and occurs every time
choice is made
• This is a real cost, the cost of an item not in terms of
money, but in terms of the resource, good or service that
had to be given up to obtain that item
Basic Economics Concepts

14. • All nations face the problem of scarcity
• They have insufficient resources to produce all the goods
& services which their citizens need and want
• An economic system is a system which attempts to solve
the basic economic problem of scarcity.
• They have to address three basic questions:
Economic Systems

15. Basic Economic Problems
(Questions)

16. • Means choosing the mix of goods & services to
produce
• Example: Should the economy devote resources to
health and education or defense and police?
• Who will do the production and which method of
production will be used.
• Should the economy use labor-intensive technique and
everyone has a job or use more efficient methods of
production that involve the use of machines even if this
means fewer jobs?
1. What to Produce?
2. How to Produce?

17. • Means who will consume the goods & services after
they have been produced
• How will we decide who receive the output?
• Should an economy be geared to provide goods &
services to every person as equally as possible or
should those who work hard get more?
• What is the best method of distributing products to
ensure the highest level of wants are met?
3. For whom to Produce?

18. Planned (Command) Economic
System (Socialism)

20. Free (Market) Economic System
(Capitalism)

22. Mixed Economic System

23. THANK
YOU