ECS1501 Summary Notes 2014

ECONOMICS 1501
1: What economics is all about
**Economics is the study of the use of scarce resources to satisfy unlimited wants**
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Wants – desires for goods and services - unlimited
Needs – necessities, essential for survival, eg food and water.
Demand – can only demand if you can afford it (purchasing power)
Opportunity cost - value to the decision maker of the best option that could have been taken but wasn’t, eg watch a movie instead of studying for an exam
Scarcity - time, space and money

Product Possibility Curve (PPC Curve)
Combinations of any 2 goods that are attainable when resources are fully and efficiently employed (always concave to the origin)

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Any point outside the curve (G) - unattainable
Any point on the curve - choice and efficiency
Any point between the points - movement between A and B - opportunity cost Any point inside the curve - inefficient but attainable, causes unemployment Economics is considered a social science (can predict people)

Micro-economics and Macro-economics
Micro-economics - individual parts of the economy in isolation
Macro-economics - overall economy
Micro economics
Price of single prod
Changes in price of single product
Decisions of indiv cons and firms
Market and demand for indiv goods
Indivs decision whether to work or not
Firms decision to expand/ export/ import

Macro economics
Consumer price index, inflation
Total output of goods
Combined outcome of decisions of all cons and firms
Market and demand for all goods
Total supply of labour
Total supply, exports and imports

Positive and Normative economics
 Positive statement - fact
 Normative statement - opinion
Levels and rate of change
 A small % (say 5%) of a large number (say R10 million) = R 500 000.
 A large % (say 90%) of a small number (say R 10) = R9
Deceptive to read into percentages - know what the original base is
Rate of change calculation
Share price goes from R10 to R20 a share, rate of change or profit percentage
End value (R20) –