By Eleanor Greene,2014-10-20 05:47
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    ; The Definition of Economics

    ; The Concept of Scarcity

    ; The Role of the MarketThe choices that the producer should


    ; 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)

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