Econ intro pp
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Economics studies the production, consumption, and transfer of wealth, focusing on how scarce resources are allocated to satisfy unlimited consumer wants. Key concepts include needs versus wants, the economic problem of resource scarcity, and the factors of production: land, labor, capital, and enterprise. Opportunity costs highlight the trade-offs individuals face in decision-making, emphasizing the need for strategic resource allocation to maximize satisfaction.
Econ intro pp
- 1. The Foundation of Economics Beenish Tariq Zuberi
- 2. What is Economics? Economics is the branch of knowledge concerned with the production, consumption and transfer of wealth. It is the study of how scarce resources are allocated to fulfill the infinite wants of consumers.
- 3. Adam Smith (1723 – 1790) O Known as father of modern economics O Wrote the first and most important books on the subject of economics, An Inquiry into the Nature and Causes of the Wealth of Nations (1776) O Smith believed in “free market” (free market is one where consumers may buy what they like and producers may produce what they like, with no government interference) Smith suggested that a laissez-faire (don’t interfere) approach should be followed, leaving customers and producers to make their own decisions
- 4. NEEDS: are the basic necessities that a person must have in order to survive e.g. food, water, warmth, shelter and clothing WANTS: are the desire that people have e.g. things that people would like to have, such as bigger homes, iphones, etc.
- 5. The Economic Problem Unlimited Wants Scarce Resources – Land, Labour, Capital Resource Use Choices A wind farm. Copyright: iStock.com
- 6. The Economic Problem O What goods and services should an economy produce? – should the emphasis be on agriculture, manufacturing or services, should it be on sport and leisure or housing? O How should goods and services be produced? – labour intensive, land intensive, capital intensive? Efficiency? O Who should get the goods and services produced? – even distribution? more for the rich? for those who work hard?
- 7. SCARCITY The excess of wants resulting from having limited resources (land, labor, capital and entrepreneurs) in satisfying the endless wants of people. It is a universal problem for societies – it is not limited to poor countries. To the economist, all goods and services that have a price are relatively scarce. This means that they are scarce relative to people’s demand for them.
- 8. Factors of Production Land - natural resources available for production - renewable resources: those that replenish - non-renewable resources: cannot be replaced Labor - physical and mental effort of people used in production Capital - all non-natural (manufactured) resources that are used in the creation and production of other products Enterprise (Entrepreneurship) - refers to the management, organization and planning of the other three factors of production
- 9. Factors of Production Land Labor Capital Enterprise Rent ProfitInterestWages INCOME Payments to factors of Productio n
- 10. Opportunity Costs All economic questions and problems arise from scarcity. Economics assumes people do not have the resources to satisfy all of their wants. Therefore, we must make choices about how to allocate those resources. We make decisions about how to spend our money and use our time.
- 11. Opportunity costs even come into play in the pursuit of happiness Opportunity costs are all around us and they differ from individual to individual. Take one look at Steve Jobs and Bill Gates and think of the opportunity costs if they had decided to forgo their entrepreneurial pursuits and continue their college education instead. Things would be very different now. Ultimately, opportunity costs apply to anything which is of value to a person and being conscious of how they apply to your situation can help in making a satisfactory choice/decision by considering the value or benefit of the next best alternative.