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Economics
Economics

Social science
 Economics
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The study how society chooses what to produce, who
to produce for and how much to produce.
“Economics is the study of mankind in the ordinary
business of life” – Alfred Marshall
“Economics is the study of how men and society
choose with or without the use of money to employ
scarce productive resources to produce various
commodities over time and distribute them for
consumption, now and in the future, among various
people and groups in society” – P.A.Samuelson
Ceteris paribus
 All
other things remaining equal
Micro and Macro
– The study of individual
parts of the economy, such as individual
markets or firms.
 Macroeconomics – The study of the whole
economy which deals with such things as
employment/unemployment, investment,
inflation, etc.
 Microeconomics
Normative and positive
Normative – These are matters of opinion which
cannot be proved or disproved by reference to
facts, since they are based on a value
judgement. They are subjective and can be
recognised by words such as “should” or
“ought”.
 Positive – These are statements of fact that be
checked against the facts and can be proved
correct or incorrect. They are not necessarily
true, but can be proved true or false.

Normative and positive
 The
world’s food supply should be shared
equally as there is enough to go round
 There
is sufficient food in the world, and if
it was shared out equally then all people
would have enough to eat.
Economic problem
Limited
resources/factors
of production
Unlimited
wants and
needs
Economic Problem
• What to produce?
• Who to produce for?
• How much to produce?
Factors of production
 Land
 Labour
 Capital
 Management/Enterpreneurship
Interest, rent, profit, wages
Opportunity cost
 As
resources (factors of production) are
scarce we are required to make choices
and sacrifice one thing to obtain another.
 The
cost of a choice is know as the
Opportunity Cost.
 The
cost of a choice in terms of the next
best opportunity forgone.
Free and economic goods
goods – these are goods that
have limited supply, i.e. they are scarce,
so there needs to be some system for
allocating them.
 Free goods – these are goods not created
from scarce resources and are available in
abundance, and as a result there is no
need to have a system to allocate them.
 Economic
PPC / PPF
 Production
possibility curve (ppc)
 Production possibility frontier (ppf)
 This
is a way of representing the choices
to society in the form of a diagram
PPC / PPF