Foundation of Economics: Economic System and Opportunity Cost
Lesson 1
FOUNDATIONS OF ECONOMICS
Lesson 1- Economic System & Opportunity Cost
1
Learning Objectives
By the end of this unit, you should be able to: give an overview of Economics deal with the Economic Problem discuss the Methodology in Economics differentiate between Microeconomic Issues and Macroeconomic Issues
Lesson 1- Economic System & Opportunity Cost
2
Lesson 1- Foundations of Economics
Lesson 1-pg1
What is Economics?
Economics is the study of how people and society choose to use scarce productive resources to produce goods and services and to allocate them in such a way as to satisfy the unlimited wants of the various persons and groups in a society. Three economic problems: Microeconomic deals with the economic choices of the individual producer, or consumer: what to produce how to produce for whom to produce
Lesson 1- Economic System & Opportunity Cost 3
Scarcity, choice
People use goods and services to satisfy their wants. The act of producing commodities is called production and the act of using these commodities is called consumption.
Our wants may be unlimited but our resources are limited in supply. This result in the problem of scarcity.
We face scarcity in : a) natural resources b) time and energy c) factors of production The basic function of any economic system is to provide the framework for choice. Resources —in this case represented by their respective incomes—are insufficient to buy all the goods and services they desire.
Lesson 1- Economic System & Opportunity Cost 4
Lesson 1- Foundations of Economics
Lesson 1-pg2
Factor of Production
These resources are called the factors of production –
1)
2)
3)
4)
land (natural resources e.g. agricultural land, minerals, gases, products of forests and oceans); labour (human resources both physical and mental abilities); capital (man-made resources called producer goods which was mentioned earlier); enterprise (supplied by entrepreneurs who
FOUNDATIONS OF ECONOMICS
Lesson 1- Economic System & Opportunity Cost
1
Learning Objectives
By the end of this unit, you should be able to: give an overview of Economics deal with the Economic Problem discuss the Methodology in Economics differentiate between Microeconomic Issues and Macroeconomic Issues
Lesson 1- Economic System & Opportunity Cost
2
Lesson 1- Foundations of Economics
Lesson 1-pg1
What is Economics?
Economics is the study of how people and society choose to use scarce productive resources to produce goods and services and to allocate them in such a way as to satisfy the unlimited wants of the various persons and groups in a society. Three economic problems: Microeconomic deals with the economic choices of the individual producer, or consumer: what to produce how to produce for whom to produce
Lesson 1- Economic System & Opportunity Cost 3
Scarcity, choice
People use goods and services to satisfy their wants. The act of producing commodities is called production and the act of using these commodities is called consumption.
Our wants may be unlimited but our resources are limited in supply. This result in the problem of scarcity.
We face scarcity in : a) natural resources b) time and energy c) factors of production The basic function of any economic system is to provide the framework for choice. Resources —in this case represented by their respective incomes—are insufficient to buy all the goods and services they desire.
Lesson 1- Economic System & Opportunity Cost 4
Lesson 1- Foundations of Economics
Lesson 1-pg2
Factor of Production
These resources are called the factors of production –
1)
2)
3)
4)
land (natural resources e.g. agricultural land, minerals, gases, products of forests and oceans); labour (human resources both physical and mental abilities); capital (man-made resources called producer goods which was mentioned earlier); enterprise (supplied by entrepreneurs who