WHATS THE ECONOMIC PROBLEM

Unlimited wants Limited resources, its called scarce resources.

OPPORTUNITY COST
The real cost of choosing

one thing and not another one.

WHAT IS ECONOMY ?
An economy is an area where people make or

produce, goods and services.

PRODUCTION, CONSUMPTION AND EXCHANGE

Production = activity to satisfy peoples wants.

Consumption = using up of products to satisfy our

wants. Exchange = exchanging products that we cannot produce for obtaining them.

MARKET
Group of people who wish to exchange products with

each other.

FACTORS OF PRODUCTION
Factors of production are inputs:
Land: natural resources (oil) labour: human resources (workers) Capital: human-made resources (machines)

Factor of production land labour capital

WHAT DO RESOURCES PRODUCE?

Consumer goods: any good that satisfies consumers

wants.
Capital goods: screwdrivers, tractors Public goods:

provided by the government.

Merit goods:

goods merited by people.

Merit goods

Public goods

WHAT IS PRODUCTION?
The making of goods and services. The firm uses resources (input) to make goods and services

(output).

THE AIMS OF FIRMS

Maximizing profits. Maximizing sales revenue Providing a public service. Non-profit-making organization.

THE STAGES OF PRODUCTION

Primary

industry: produce natural resources.

 Secondary industry:

They use raw materials to make other goods, its known as manufacturing.

 Tertiary industry:

Firms which make services.

THE DIVISION OF LABOUR

The increased production achieved by specialization

is the result of it.

PRODUCTION AND TIME

Momentary run= firm cant increase production. Short run= firms can increase production only by employing

more. Long run= a firm employ more of all factors of production.

THE COSTS OF PRODUCTION

Break-Even point

Total Cost

How price are decided?

What is demand?
Its the want of the consumers to buy goods and services.

What is supply?
It refers to the amount of a product firms are willing to make and sell at a number of possible prices.

Prices depend on how much people want a product.