1. Basic Concepts of
Economics
Prepared by:
Smriti Chakrobarty
Lecturer
Fisheries and Marine Science
Noakhali Science and Technology University
Shared by:
Md. Asrafur Rahman
ASH1402072M
Fisheries and Marine Science
Noakhali Science and Technology University
2. Economics
Economics – comes from Oikonomia.
Smith – which investigate the nature and causes
of the wealth of nations.
L. Robins – science which describes the
relation between scarce resources and infinite
wants.
- wants are infinite, resources are scarce and
alternative uses of scarce resources.
3. The study of how societies use scarce resources
to produce valuable commodities and distribute
them among different people – Economics.
Two key points: goods are scarce, society must
use it’s resources efficiently.
Important because of the fact of scarcity and
the desire for efficiency.
4. An economy is producing efficiently when –
- it cannot make anyone economically better off
without making someone else worse off.
Fisheries economics:
The production, distribution, and consumption
of fish and seafood and all financial aspects of
the fishing and seafood industry (including
aquatic life in fresh water).
5. Scarcity and Efficiency
Scarcity - A situation in which goods are limited
relative to desires.
Efficiency - The most effective use of society’s
resources in satisfying people’s wants and needs.
To acknowledge reality of scarcity and figure
out how to organize society in a way to produce
most efficient use of resources.
6. Microeconomics and Macroeconomics
Adam Smith – founder of microeconomics.
The branch of economics which is concerned
with the individual entities (markets, firms,
households).
Smith considered how individual prices are
set, studied the determination of prices of land,
labor and capital; and inquired into the
strengths and weaknesses of market
mechanism.
7. Smith identified the remarkable efficiency
properties of markets and saw that economic
benefit comes from self interested actions of
individuals.
Macroeconomics – other major branch which
is concerned with overall performance of the
economy.
It examines a wide variety of areas such as -
- how total investment and consumption are
8. determined,
- how central banks manage money and interest
rates,
- what causes international financial crisis, and
- why some nations grow rapidly while others
stagnate.
* The two branches converge to form the core of
modern economics.
9. Positive and Normative Economics
Positive – describes the facts of an economy.
- deals with questions.
- these questions can be resolved by
reference to analysis and empirical evidence.
• Normative – involves value judgements.
- involves ethical precepts and norms
of fairness.
10. There are no right or wrong answers to the
questions.
Because they involve ethics and values rather
than facts.
These can be resolved only by political debates
and decisions, not by economic analysis alone.
11. Market Economy
It is one in which individuals and private firms
make the major decisions about production and
consumption.
A system of prices, of markets, of profits and
losses, of incentives and rewards determines
what, how and for whom..
Firms produce the commodities that yield the
highest profits – the what.
12. By the techniques of production that are least
costly – the how.
Consumption is determined by individuals
decisions about how to spend the wages and
property incomes generated by their labor and
property ownership – the for whom.
13. Command Economy
It is one in which the government makes all
important decisions about production and
distribution.
The govt. -
- owns most of the means of production (land
and capital).
- also owns and directs the operations of
enterprises.
14. It is the employer of workers and tells them how
to do their jobs.
It decides how the output of the society is to be
divided among different goods and services.
The govt. answers the major economic questions
through it’s ownership of resources and it’s
power to enforce decisions.
15. Mixed Economy
No contemporary society falls completely into
either market or command economy.
All societies are mixed economies with elements
of market and command.
There has never been a 100 percent market or
command economy.
Most societies today operate mixed economies.
16. Inputs and Outputs
Inputs – are commodities or services that are
used to produce goods and services.
Outputs – are various useful goods or services
result from production process and are either
consumed or employed in future production.
Inputs are of three types:
- Land, Labor and Capital.
17. Land – natural resources.
- represents the gift of nature to our
productive processes.
- consists of the land used for farming, the
energy resources and the non energy resources.
* Labor – consists of the human time spent in
production.
- Thousands of occupations and tasks are
performed by labor.
18. - It is the most familiar and most crucial input.
Capital – form the durable goods of an
economy, produced in order to produce other
goods.
- includes machines, roads, buses, mills.
- the accumulation of specialized capital
goods is essential to the task of economic
development.
19. Restating the three economic problems in terms
of inputs and outputs, a society must decide –
What outputs to produce and in what quantity.
How to produce them – by what techniques
inputs should be combined to produce the
desired outputs.
For whom the outputs should be produced.
20. Economic Activities
1. Production of goods and services.
2. Exchange of goods and services.
3. Distribution of goods and resources.
4. Consumption of goods and services.
21. Fundamental Problems of Economics
What goods will be produced (Problem of
production).
How the goods will be produced (Technique of
production).
For whom the goods will be produced (Production
for whom).
Efficiency in production and consumption.
