2. Introduction to Economics
Have you ever heard before what …..is?
Economics,
Unlimited human wants,
Scarcity,
Choice, Tradeoff, Opportunity cost,
Production,
Factors of Production
Market,
3. Cont.….
Economics is one of the most exciting disciplines in social
sciences.
As a body of knowledge, the effective birth of economics as a
separate discipline may be traced back to 18th century.
There was, of course, economics before, the Greeks, Islamic
Scholars, Chinese Writers, Middle Ages in Europe all have
their contributions to the economics. But existed as
unorganized and philosophical.
4. Cont.….
The word economy comes from the Greek word
“oikonomos” which means ‘one who manages a household.”
In fact, household and society have much in common.
Economics deals with many socioeconomic issues, most of
which are of immediate concern to us.
5. Definition of Economics
Several economists have defined economics taking different
aspects into account.
Adam smith defined economics as the as the science of wealth
Alfred Marshall defined economics as the study of mankind in the
ordinary business of life
Lionel Robbins defined economics as the science which studies
human behavior as a relationship between ends and scarce
6. Cont.….
Prof. Paul Samuelson defined economics as “the study of
how men and society choose, to employ scarce productive
resources which could have alternative uses, to produce
various commodities over time, and distribute them for
consumption, now and in the future among the society.
7. Cont.….
Conclusively, economics can be defined;
Economics can be defined as; the study of how society manages its
scarce resources
Economics is the study of the use of scarce resources to satisfy
unlimited human wants
Two major factors are responsible for the emergence of economics.
the existence of unlimited human wants
the scarcity of available resources
8. Basic Concepts in Economics
Unlimited Human Wants
Human wants are unlimited. This means that they are
never ending and can never be fully satisfied
Resource are scarce
This means resources (such as time, money, land, labor,
capital and natural resources) are limited according to
the unlimited human wants.
Choices
This means selecting one from number of alternatives.
Choices become necessary as a result of scarcity.
Making a choice implies giving up something in order
to get something else.
9. Cont.….
Opportunity Cost
The value of the alternative forgone in order to get the other
alternative
Rationality
This is an economics assumption of that individuals will pick
up the alternative which he gains optimum benefit.
Production
Is the process in which various inputs both Material and
Immaterial are used to produce the outputs in the form of
products or services.
10. Cont.….
Factors of production
Are the resources used in the production process. They can
be; land, labor, capital, and entrepreneurship.
Market
Is a set up where buyer and sellers meet to exchange goods or
service for profit.
11. Scope of Economics
Economics covers central issues faced by any society.
The central questions that economics response are;
What to produce
How to produce
For whom to Produce
12. Branches of Economics
In general, economics can de branched in to two main divisions;
i) Microeconomics
ii) Macroeconomics.
However, In the recent past, many new branches of the subject
have developed, including Development Economics, Industrial
Economics, Environmental Economics, Agricultural Economics
, Labor Economics, Behavioral Economics, and so on.
13. Micro economics
The word micro is derived from the Greek word mikros
meaning small.
Microeconomics is a branch of economics that is concerned
with the behavior of individual consumers, firms, industries,
commodities and prices.
It deals with the consumers, producers, firms or industry,
individual income, the determination of product price, factor
price etc.
14. Macroeconomics
The word macro is derived from the Greek word makros
meaning large.
Microeconomics is a branch of economics that is concerned
with how an overall economy—the markets, businesses,
consumers, and governments—behave
It deals with the overall aggregate/national of microeconomics
It analyses with the national output, total employment, national
income, aggregate savings and investment etc.
15. Methods of Economic
Analysis
Economics adopts the usual methods of scientific analysis for the
discovery of its laws and principles.
Deductive Method or Inductive Method
Deductive Method Means reasoning or inference from the general
to the particular or from the universal to the individual.
Inductive Method is the process of reasoning from a part to the
whole, from particulars to generals or from the individual to the
universal
16. Deductive Method
Here, we descend from the general to particular
The deductive method derives new conclusions from
fundamental assumptions or from truth.
For example any supply and demand analysis you do is the
application of generally accepted principles about demand
and about supply; therefore, you are engaging in deductive
logic.
17. Inductive Method
This method mounts up from particular to general
The inductive method develops economic theories on the
basis of observations and experiments
For example data on consumption of poor, middle and rich
income groups of people are collected, classified, analyzed
and important conclusions are drawn out from the results
18. Normative & Positive
Economics
Economic concepts can be stated in two different approaches
Normative Economic Statement or Positive Economic Statement
Positive statement;
it is concerned with the question of what is?
It is based on data and facts
Normative Statement; It is concerned with the question of what
ought to be?.
It is based on values, opinions and judgments
19. Cont.….
Examples of Positive Statement
scarcity
rational self-interest
profit maximization
Example of Normative Economic Statement
Democracy for development
Wealth tax for wealth distribution
Individual inheritance limit
