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Economics

u Study of scarcity

Introduction to u Study
of how people use scarce resources and
how they manage these resources to satisfy
Economics people’s unlimited wants

QOQ BBD AXA OOO JRJ III QOQ BBD AXA OOO JRJ III

GSG KKK YYX LJL OOO KLL GSG KKK YYX LJL OOO KLL

COO WVV NNN EEL UUV SOS COO WVV NNN EEL UUV SOS

OOO AAC GGC TTF TPP MIM OOO AAC GGC TTF TPP MIM

MMB IXX POP PQP ZZA MMM MMB IXX POP PQP ZZA MMM

EVE AAL CCD III AAA HNN EVE AAL CCD III AAA HNN

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Scarcity

KEY TERMS

Resources

u Inputs
or factors of production, used to
Scarce Resources, produce the goods and services that
people want
Unlimited Wants
THE ECONOMIC PROBLEM

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Goods & Services MICROeconomics vs MACROeconomics

u Goods. Tangible product used to satisfy

human wants
u Tangible
u Intangible

u Services. Intangible acts for which people

are willing to pay

MICROeconomics MACROeconomics

• Small – scale economic decisions made by u Thestudy of economic behavior as a whole

individuals, household, firms or industries, and with the view of understanding the interaction
governments
between economic aggregates
o Introduction to the Market
o Consumer Behavior
o Firms behavior
o The Market itself

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Trade Offs Opportunity Cost

u The value of the best alternative forgone when

u ALL the
things you are giving up when an item or activity is chosen
you choose one over the other

Human Capital Investment

u Theproductive knowledge and skill u The

money spent by businesses to
people receive from education, on-the- improve their production
job training, health and other factors that
increase productivity

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Consumer Goods & Capital Goods Economic System

u Consumergoods. Created for direct u Method used by society to produce and

consumption distribute goods and services
uWhat goods and services should be
produced?
u Capital goods. Created for Indirect uHow should these
goods and services be
consumption produced?
uWho consumes these goods and services?

Market Equilibrium Production Possibilities Frontier

u The
point at which the market supply and uA curve showing alternative combinations
market demand curves intersect. of goods that can be produced when
available resources are used efficiently; a
boundary line between inefficient and
unattainable combinations
A B C D E
Cookies 30 29 25 15 0
PPT 0 1 2 3 4

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40

30
Cookies

Calculate Opportunity
20
PPT
Cookie s

10 Cost
0
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
PPT

A B C D E
Cookies 30 29 25 15 0
PPT 0 1 2 3 4

Calculate the Opportunity Cost for the Following: Shape of the PPF
Aà C
BàD
Curve is Important
EàD
DàA

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Constant Opportunity Cost Increasing Opportunity Cost

u Shows a curve that is concave to the origin

uShows a straight Line
uBecause the resources to produce
two goods are very similar
u The resources to produce two goods are
completely different.
u The Law of Increasing Opportunity Cost
states that when all resources are being
used, an increase in the production of one
good will lead to greater forgone production
of another good.

Shifters of the Production Possibilities Shifters of the Production Possibilities

Frontier Frontier (Practice)

1. Changes in the quantity or quality of 1. Faster computers

available resources
2. Destruction
of Meralco substation
2. Change in technology
3. High unemployment

TRADE. Allows countries to consume 4. Introduction of K-12 and upgraded

beyond their own production possibilities curriculum