What is Economic ?
- “A science that deals with the allocation of scarce resources for the purpose of fulfilling human being needs and wants”
- “Resources are scarce and the society has unlimited need and wants”
Basic Components of Macroeconomics
- Trade
- Growth
- Inflation
- Interest Rate
- Exchange Rate
- Full Employment
Basic Concepts of Economics
- Scarcity and Choice
- Opportunity Cost
Economics Resources
- Used to produce goods and services to satisfy human wants
- Limited in supply
- Scarce, their quantities are insufficient to satisfy all human wants
What is Scarcity ?
- The resources are insufficient to fulfill or satisfy a human needs.
- Human always need more than their basic needs
- Create economic problems in human society
- “A situation in which the amount of something actually available would not be sufficient to satisfy the desire for it, if it were provided free of charge”
Factors of Production
What is Opportunity Cost ?
“The highest valued option forgone”
Example:
- “We have lecture today at 10 am, what will be your opportunity cost”
- Going to library? Sleep at hostel? Playing netball???
- Only ONE option will represent opportunity cost, which is the highest values option forgone
Economic System
An economy or economic system is the way a nation makes economic choices how the nation will use its resources to produce and distribute goods and services
Basically we have 3 types of basic economic system
1. Traditional system
- Decision based on customs, religion and beliefs
- No individual decisions, all based on group decisions.
- Goods and services are produces by the family for their personal consumption (exchange of goods).
- Only have little surplus of productions and traditional trade approach
2. Command system
- All resources are belongs to the government
- Only the government can decide what and how much to produce.
3. Market economies system
- All decision made by the market equilibrium stage
- Resources are allocated through individual decision making
- People can own their business and property