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Welcome to
Economics
Powerpoint produced by Rachel Farrell (PDST) & Aoife Healion (SHS, Tullamore)
Science
• Is knowledge gained by
observation and experiment
that is repeated and tested
Social Science
• Is the study of human behaviour
Aims
• Are the goods and services that
people require from an economy.
• They are divided into needs and
wants.
Needs
• Are essentials required for survival.
• Basic needs.
• Food, shelter, clothing.
Wants
• Are anything in excess of our needs.
• Things we can live without.
• TV, holidays, i-pod………………
Scarce Resources
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AKA
The factors of production.
Land
Labour
Capital
Enterprise
What is economics?
• Economics is a social science
which studies human behaviour
in relation to people’s aims
and the scarce resources available to them
to achieve these aims,
knowing that the resources have
alternative uses.
The Factors of
Production
• Are those scarce resources which
we use to produce wealth.
4 Factors of Production
• Land
• Labour
• Capital
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Enterprise
Land
• All things supplied by nature
which helps to create wealth.
• It is fixed in supply.
• Eg. fields, water, natural gas,
oil, coal, minerals, trees……..
• The payment/reward for land
is rent.
Labour
• Any human effort which helps
to create wealth.
• Eg. employees, builders,
carpenters, factory workers…..
• The reward for labour is
wages.
Capital
• All man-made things that are
used to create wealth.
• Eg.buildings, machinery,
computers, tractors………..
• The reward for capital
investment is interest.
Enterprise
• The human activity that brings
together the 4 factors of production
to take the initiative and risk to set up
a new business.
• Eg. Bill Gates, Richard Branson…
• The reward for enterprise is profit.
• The risk of enterprise is loss.
Example: Bread
Land
Wheat
Labour
Farmer, baker
Capital
Tractor, oven, bakery
Enterprise
Cuisine de France
Opportunity Cost
• Factors of production are scarce.
• They have alternative uses.
• Therefore we must make choices when
deciding what to produce or purchase.
• (2005 SQ 1)
Opportunity Cost (continued)
• The opportunity cost is the sacrifice of
the item you must do without when you
have to make a choice between two items
you want to produce or purchase.
• (2005 SQ 1)
Opportunity Cost (continued)
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Example
I have €2.00.
I can buy ice-cream or pringles.
I choose ice-cream.
Financial cost = €2.00
Opportunity cost = pringles.
2007 SQ 7
• An Irish banking group own thirty
branch offices. There is no
opportunity cost to the banking group
using these offices as they are fully
owned.
• True/False
Answer
• False
• The branch offices could be sold and
the money invested.
• An income could be earned from
renting the branch offices.
Externalities
• Are the unintended side effects of a
calculated decision to do something.
• Bad: Factory = pollution, noise, traffic.
• Good: Money from rates used to build
sports hall…
Wealth
• Is a stock of goods and services
which have been accumulated.
• Eg. cars, houses, computers…..
•
Note: See interactive resources
Income
• Is a flow of goods and services.
• It is possible to have a high standard of
living and to spend all your earnings on
disposable goods and have no wealth left
to show for that spending.
Our Welfare
Comprises of having a combination of good;
• Income
• Wealth
• Health
• Happiness
• Living conditions
•
The Aims of Economics
1. To achieve efficient use of resources

To use the factors of production in such a
way as to satisfy as many of the needs and
wants of society as possible.

Eg. recycling, efficient cars……
2. To achieve an equitable distribution
of wealth
 Rewarding people in relation to the
contribution they make to the economy.
 Providing income for people unable to work.
3. To create stability in an economy
 To attempt to avoid the cycle of booms
(huge economic growth) and slumps
(recessions) in the performance of an
economy.
Microeconomics
• Deals with individual units and the
interaction between them.
• Eg. consumer, household, firm.
• It deals with supply and demand.
• It shows how many goods will be
produced and consumed at a given
market price.
Macroeconomics
• Is the study of the entire economy in
broad terms.
• Eg. the total income in the economy,
the total level of employment,
the total amount of production.
Open Economy
• Trades with other countries.
• Eg. Ireland.
Closed Economy
• Does not trade with other countries.
A Free Good
• Is a good that is plentiful in supply.
• Eg. Air, water.
• But their status may change due to
pollution, drought………
An Economic Good
1. Is a good that demands a price.
2. It must give some satisfaction when
consumed.
3. It must be transferable from one
person to another.
Students: Write a brief
Explanation of each point & eg.
A Capital Good
• Is a good not wanted for itself.
• But for the contribution it makes
produce goods and services.
An Economic Model
• Is a simplified representation of the real
world.
Ceteris Paribus
 Is the assumption that no other factor
which influences the topic we are talking
about changes at that time.
 i.e. “All things being equal.”
Eg. If price increases
demand falls,
assuming that incomes did not rise.
The laws of economics
are dynamic
• Because;
• They are not statement of fact.
• They are a statement that under
certain economic conditions, certain
people will act in a certain way.
• Economic laws may become obsolete
due to;
• Changing human behaviour.
• Changing economic conditions.
Positive Economics
• Is a neutral science.
• It states what is.
• It does not give value judgements.
Eg. The government needs to increase
spending. (leaves it to gov to decide on what)
Normative Economics
• Is based on value judgements.
• Eg. The government should spend
more money on education as this is
best for the nation’s future.
Deductive
Reasoning(abstract)
• Going from general to particular.
• Drawing conclusions from generally held
principles.
• Eg. If prices of goods fall demand increases,
therefore if the price of Daz falls more
of it will be demanded.
Inductive Reasoning
(empirical)
• Going from particular to general.
• Drawing conclusions from observing known
facts of many many particular situations.
Eg.
• A study found that demand fell in 1,000
individual shops when prices were
increased.
• Therefore we can conclude that when
prices rise, demand falls. (ceteris paribus)