2. .Introduction to economics
The economic problem:
Scarcity and Choice
1st: Definition of Economics:-
Economics is a social science concerned
with how individuals, institutions, and
society make the best use of limited and
scarce resources to satisfy the unlimited
human wants.
3. -From the definition we can differentiate between:
1-Resources: Are the factors of production (or inputs)
used to produce goods and services and it consists of:
-Natural resources: such as land & raw materials.
-Human resources:(labour resources)which could be
physical or mental.
-Capital resources: such as equipments, as well as
human capital (education, health, and training).
-Entrepreneur: he organizes the factors of production
4. 2-Human Wants or Needs:-
Consists of all goods (tangible) & services
(intangible) that people would like to consume.
3-Production:- Is the process of transforming
inputs into outputs.
Any economic system faces 3 questions about production
a)what should be produced?
b)How to produce?
c) Who gets the produced goods?
5. 2nd-Microeconomics & Macroeconomics
-Microeconomics:- Is the study of
economics on the level of individuals, like:
consumers, producers, single market or
industry.
-Macroeconomics:- Is the study of economic
aggregates (totals) on the level of whole
economy or country.
6. 3rd:-The economic problem
The economic problem that our wants exceed
our resources & this will create Scarcity.
1) Scarcity: means that the available resources
are not enough to satisfy all human wants.
2) Choice: as resources as scarce all societies
face the problem of deciding what to produce
and the quantities to be produced.
7. 3) Opportunity COST:
-the choice implies the existence of opportunity
cost
*the cost of obtaining a certain product is
what you gave up of a second product in
order to get it.
*(or)the opportunity cost is the best
alternative you give up when you make
any choice decision .
8. 4th. The production possibility frontier
(PPF)
1- Definition:
-The PPF shows all combinations (mix) of two
goods that can be produced in the economy if
all resources are fully & efficiently used.
THE PPF is based on the following assumptions
a) Only two goods are produced.
b) A limited amount of resources
c) Full & efficient use of resources.
d) A given level of technology.
9. 2) Graph and Features (Characteristics) of the PPF
1- The PPF must be negatively sloped, reflecting the
opportunity cost.
i.e: In order to produce more of one good you have to
decrease production from the other good.
2- Points "on or along" PPF which is (A, B & C) are:
Attainable: can be produced
Efficient: resources are fully and efficiently used.
10. 3- Point "below or lower" than the PPF, such as (D):
Attainable: can be produced.
Inefficient: resources are not fully or efficiently used.
4- Points above or higher than PPF, such as (E):
Unattainable: cannot be produced with current resources.
We can reach such a point if we:
*Increase productivity
*Increase resources
*Technological advance
11. Illustrating Scarcity, Choice, Opportunity Cost by
using the graph of the PPF
A) Scarcity: is represented by all points lying above the
PPF such as point (f)
B) Choice: is represented by the need to choose between
points on the PPF such as(a, b, c ,d)
C)Opportunity cost: is represented by the negative slope
of the PPF
(if x increase----> y decrease)
