INTRODUCTION TO ECONOMICS
Preview:
; The Definition of Economics
; The Concept of Scarcity
; The Role of the Market;The choices that the producer should
make
; The Simple Circular Flow of Income
1. The Definition of Economics
Economics is a social science that studies the relationship between scarce resources and the economic agents that
complete for them.
(Other ways to explain what economics is : The study of how people make choices under the conditions of scarcity and of the results of those choices for society.) NB: Social science ___ the behavior of people, influence on economics
Scarce resources ___ resources are limited
Economic agents ___ anybody do with economics
2. The Concept of Scarcity
Scarcity: i.e.: limited resources combine with unlimited resources
Result in choices being made
From a producers respective
?What goods/services should be produced? Profits__ person ; Society__ government ?How are goods/services produced?
By machine or by labor __ effective
(NB: either labor intensive or capital intensive) ? How are goods/services shared out among the population?
(Free market system: individual spending power
Government control: meet the government’s satisfaction)
3. The Role of the Market
Market: brings together potential buyers and sellers
(The concept of market: the market for any good consists of all buyers or sellers of that good)
From a boarder respective this means: ?consumers make decisions on consumption
?producers decide on what and how goods/services are produced
? Workers decide on supply of labor and for whom
NB: All of the above are brought together via the price machine
i.e. : supply and demand
4. The Simple Circular Flow of Income
Goods and services wage, interest, rent, profit Firms ———————— ——————————> Households
<——————— ——————————
Expenditure (money) labor, capital, land, enterprise
(Good and services market) (Factor market)