Download There are many Definitions of Economics : It is the study of wealth

There are many Definitions of Economics :
 It is the study of wealth (Adam smith)
 It is the study of welfare
 it is the study of exchange and production
The standard definition :
Economics is the social science which examines how people choose to use limited or scarce
resources in attempting to satisfy their unlimited wants
Branches of Economics :
divided into two branches
Microeconomics
which examines the economic behaviour of individual such as businesses, households, and
individuals .
Macroeconomics
which examines the behavior of economic aggregates— income , employment, inflation
, and so on—on a national scale.
( study an economy as a whole)
Scarcity
Scarcity means that people want more than is available
Scarcity As individuals, limited income (and time and ability)
Scarcity As a society limited resources (such as, machinery, and natural resources)
Positive and Normative Economics
Positive economics:
studies economic behavior without judgments (describes the fact of an economy)
Normative economics:
also called policy economics, analyzes outcomes of economic behavior, evaluates them as
good or bad .) what ought to be)
Inputs and outputs
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Inputs are the resources available .
FoP (factors of productions) are land, labor, capital and management.
land
includes the land it self, the energy resources that fuel our cars & heat our homes,
nonenergy resources like iron and sand
Labor
the human time spend in production , the human time spend in management.
Capital :
refers to the tools, machinery and equipment which businesses use .
Capital goods :
goods used to produce other goods and services.
management
The management refers to the person who develops the business idea, and then organises
the other three factors of production to carry out the activity .
The Production Possibility Frontier(PPF):
Refer to all of the combinations of goods and services that can be produced if all of society’s
resources are used efficiently.
The production possibility frontier curve has a
negative slope, which indicates a trade-off
between producing one good or another.
Points inside of the curve are inefficient. At
point H, resources are either unemployed, or
are used inefficiently.
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Point F is desirable because it yields more of
both goods, but it is not attainable given the
amount of resources available in the economy.
Point C is one of the possible combinations of
goods produced when resources are fully and
efficiently employed.
A move along the curve illustrates the concept
of opportunity cost.
From point D, any increase the production of
capital goods requires a decrease in the amount
of consumer goods.
The Law of Increasing Opportunity Cost:
The slope of the ppf curve is also called the
marginal rate of transformation (MRT).
Productive efficiency:
produce what people want at the least possible cost.
The opportunity cost:
Opportunity cost refers to the benefit lost from given up or foregone alternatives.
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