Economics is the social science that studies how individuals and societies make choices about production, distribution, and consumption of goods and services under conditions of scarcity. It aims to describe the factors that influence these economic decisions. Scarcity means that human wants are unlimited while resources are limited, so people must make choices. This involves weighing costs and benefits known as opportunity costs. Economics teaches how to make rational choices by systematically reviewing options and potential outcomes. Productivity measures the relationship between inputs like resources and outputs like goods and services. Effectiveness is about doing the right activities, while efficiency is about doing things in the right way.

1. ECONOMICS
Economics as a science
Short revision
series

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 Economics is the social science that aims to
describe the factors which determine the
production, distribution and consumption of
goods and services

3. What is economics?
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 Adam Smith is considered to be the father of
economics
 Is a social science
 Studies human behavior
 Teaches how to take rational decisions
 Society is the laboratory concerned with any
test related to economics
 Can be basically divided into two branches as
micro and macro economics

4. Micro-economics
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 Is a study of individual parts
 Study how individual parts known as micro
economic agents takes decisions in the dynamic
environment
 Look at one economic agent at once and come
up with informational phrases or economic
statements
 Ex; market demand for SOAP

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6. Macro-economics
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 Studies the economy in aggregate
 Look at the entire economy as a whole and
come up with economic statements.
 Ex; inflation rate

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10. Economic statements
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 There are two types of economic statements
 They are positive and normative economic
statements

11. Positive economic statements
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 Deals with facts
 Can be proved
 Can be measured
 Realistic
 Objective
 Quantitative
 Ex; disposable income is the income that is
arrived after deducting taxes from gross
earnings

12. Normative economic statements
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 Can not be measured
 Is only a judgment
 Subjective
 Qualitative
 Words such as aught to and should to are used
 Ex; minimum wage should be increased in an
effort to increase standards of living

13. What gave birth to the subject
economics?
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 Scarcity

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16. What is scarcity?
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 Amal wants to buy an iphone ..hmm a macbook.
.and…an.ipod…ipad..and ……….
 What?
 But has Amal got enough money to buy them
all?
 No 

17. Scarcity……….
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 The gap between unlimited wants and limited
resources could be simply known as scarcity
 In the previous example Amal had lot of wants
but he didn’t have enough money to buy them
all
 So he should make a choice
 This is simply called economizing

18. What is “Economizing”?
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 Economizing simply means avoiding wastes or
reducing expenditures.
 Economics teaches how to economize
 To economize, we have to take rational
decisions

19. Rational decisions? What is that?
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 A method for systematically selecting among
possible choices that is based on reasons and
facts.
 In a rational decision making process, a
business manager will often employ a series of
analytical steps to review relevant facts,
observations and possible outcomes before
choosing a particular course of action.

20. So u say to make a choice?
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 We cant have all what we want.
 We have to make choice among alternative
options available
 This is simply known as “choice”.

21. So what about other options?
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 As mentioned before we cant have all what we
want.
 Its due to scarcity.
 So we have to make a choice
 Choice involves an opportunity cost

22. Opportunity cost?
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 The cost of the next best alternative forgone
when making a choice can be simply known as
opportunity cost
 Opportunity cost can be measured by dividing
forgone production by increased production.

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25. Scarcity, alternative options, choice
and opportunity cost??? All inter-
related??
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 Yes it is
 Scarcity -> alternative options  choice ->
opportunity cost

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27. Needs and wants
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 Definitions
 Inter- relationship
 Differences 8

28. What are the solutions for needs and
wants?
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 Goods and services
 In economics the term goods refers to both goods
and services
 Goods are the final outcome of production
process
 Hence studying on production process is vital

29. Production process
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 Input -> process -> output
 What are economic inputs?
 Economic inputs are:
 Factors of production
 Factors of productivity

30. Factors of production
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 Property resources
 Land
 Labour
 Human resources
 Capital
 Entrepreneurship
 Time
 Knowledge
 Skills
 Experiences

31. Factors of productivity
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 Human capital
 Technological developments
 Specialization and division of labour
 Management and administration

32. Resources? Economic input?
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 Yes
 Factors of production and productivity
together stands for “RESOURCES”
 Resources are inputs that can be used up in
production
 Anything that can be used in production is a
resource.

33. Classification of resources
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 Economic resources Vs non economic resources
 Renewable resources Vs non renewable
resources
 Finite and infinite resources

34. What are the economic outputs?
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 Goods and services
 Anything that satisfies a want for a need can
be known as a good or a service
 What is a need?
 What is a want?

35. Classification of goods
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 Economic goods Vs non economic goods
 Consumer goods Vs producer goods

36. production = productivity????
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 No!!!!!
 Productivity is the relationship between output
and the input
 Production is the conversion of input into
outputs.

37. What is economic efficiency?
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 “Doing the thing right”
 Can be divided in to 2
 Allocative efficiency; Allocative efficiency
occurs when MB=MC. In other words if resources
are allocated optimally is said that Allocative
efficiency exists.
 Productive efficiency; productive efficiency can
be defined as producing goods and services for
the lower cost

38. What is effectiveness?
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 “Doing the right thing”

39. Productivity = effectiveness / efficiency
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