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Economics is a social science which studies how resources are

allocated.
A study of human behaviour - how human actions are influenced by
the constraints of society, therefore they need to make rational
choices to satisfy certain objectives.
Basic Economic Questions:
1.What goods and services to be produced?
2. How are things going to be produced?
3. For whom are things going to be produced?
Microeconomics The branch in economics that studies the
individual units: e.g. household, firms and industries. It studies the
interrelationships between these units in determining the pattern of
production and distribution of goods and services. It also studies the
behaviour of individual decision-making units.
Microeconomics studies individual markets like
-how changes in prices may affect the market
-why the price is at a certain level
Macroeconomics studies economic behavior of aggregates (grand
totals) or it studies the overall performance of an economy e.g.
overall level of prices, output and employment in the economy
(Instead of looking at the individual price, we look at the general
price level)
Aggregate demand- the total level of spending in the economy
Aggregate supply- the total nations output of goods and services
Result of aggregate demand that is too high relative to aggregate
supply:
1. inflation- rise in the level of prices
2. balance of trade deficits- excess of imports over exports
3. recession- period where national output declines and falls for
six months or more.
4. Unemployment
Positive statement is a factual statement obtained from survey
and research, without making judgements whether the outcomes
are good or bad. (e.g. The unemployment rate for last year is 4.6%)
Normative statement is based on value judgement, using an
approach that analyzes the outcome of economic behaviour,
evaluates them as good or bad, and may prescribe courses of
action. (The minimum wage should be raised every year)
Outputs- goods & services

Inputs- factors of production

Factors of production:
1. Land- natural resources, raw materials
2. Labour- human resources
3. Capital- inputs that have to be produced e.g. factories,
machineries, transportation
Scarcity is the excess of human wants over what can actually be
produced to fulfil their unlimited wants
Scarcity and Choice- Limited or scarce resources force individuals
and societies to choose among competing uses of resources
When making choices, human beings are assumed to be rational to
maximize their satisfaction (consumer seek to maximize
satisfaction, firm seeks to maximize profits)
Because the resources are scarce and human wants are unlimited,
we have to choose to consume certain good and service.
Opportunity cost is the value of goods and services forgone ( aka
best alternative forgone)