Académique Documents
Professionnel Documents
Culture Documents
ECONOMICS
1
DEFINITION OF ECONOMICS
Economics is the social-science study dealing with the use of scarce
resources to obtain the maximum satisfaction of society’s virtually
unlimited material wants.
McConnell & Brue
Economics is the study of how society chooses to allocate its scarce
resources to the production of goods and services in order to satisfy
unlimited wants.
Irvin B. Tucker
As “the science which studies human behavior as a relationship between
ends and scarce means which have alternative uses.”
L. Robbins
2
MOST ECONOMISTS AGREE THAT ECONOMICS IS:
a social-science study which concerns with human behavior
in making the decision on how people use scarce
resources in fulfilling their unlimited wants.
3
DEFINITIONS OF
MICRO AND MACRO ECONOMICS
THE WORDS :
4
MICROECONOMICS
For example:
i. a study to look at the interaction between the producers
and consumers in a market.
ii. income of a teacher
5
EXAMPLES OF MICROECONOMICS STUDY
issues like the demand and supply of cars in the market
in Malaysia
7
EXAMPLES OF MACROECONOMICS ISSUES
8
BASIC ECONOMIC CONCEPTS
i. Scarcity – the condition in which human wants are forever
greater than the availability of economic resources time &
goods; “YOU CAN’T HAVE ALL YOU WANT”
1. LAND
Productive inputs provided by nature (natural resources)
Anything that is produce naturally
Ex: forest, gold, tin, petroleum, water, air etc.
2. LABOR
Mental or physical capacity of workers in producing goods
and services
Ex: lawyer, teacher, mechanics, lifeguards etc. 9
3. CAPITAL
Other goods that contributes to the production of final
goods and services.
Ex: machinery, equipment, transportation (trucks &
lories), warehouses, factory/plant
4. ENTREPRENEURSHIP
Creative ability of individuals to look for profits by
combining resources to produce innovative products.
One who looks for opportunities, highly motivated,
innovative, risk averse
If weren’t for entrepreneurs, fishermen will still fist
using sticks and farmers will still milk cows using
hands.
10
Labor
Land Capital
Entrepreneurship organizes
resources to produce goods
and services
11
ii. Choice – since factor of production are limited, choices
must then be made between various g & s to satisfy the
potential dmd – max utility (consumer) & max π (producer)
i. Individual
a) To fly or drive to Penang
b) To stay in a resort or Pak Long’s place while in Penang.
ii. Firm
a) To build low cost apartment or double-storey houses
iii. Country
a) To spend on health or education 12
4 BASIC ECONOMICS QUESTIONS/PROBLEMS
i. WHAT to produce?
• Knowing that resources are limited a producer has to
decide what to produce.
Do you want to produce military goods or consumer
goods?
Should we produce small cars or large cars ?
Produce more public transportations (buses,
commuters, LRT, monorail) or private vehicles?
13
ii. HOW to produce?
• How to mix technology and resources to produce
goods and services.
What is the most cheapest or economical way to
produce?
One has to decide whether to use capital (machine)
or labor (human) intensive.
The most important thing is to minimize the cost of
production
14
iii. HOW many/when to produced?
• depends on the demand from consumers and also the
availability of resources.
15