ECONOMIC

the branch of knowledge concerned with the production, consumption, and transfer of wealth.

What is Economics?
Economics is the study of how people choose to use resources.
-American Economics Association
Economics is the study of how societies use scarce resources to produce valuable goods and services and
distribute them among various individuals.
-Samuelson et al 2010

Economics is a scientific approach to understand economic life.

What does Economics study?
•Explores the behavior of the financial markets, including interest rates, exchange rates and stock prices (4)

•Examines why some people or countries have high incomes while others are poor. Analyzes how poverty can be
reduced without harming the economy

•Studies business cycles –fluctuations in credit, unemployment, and inflation –along with policies to moderate them

•Studies international trade and finance and the impacts of globalization. Examines issues of opening up borders to
free trade

•Asks how government policies can be used to pursue important goals such as rapid economic growth, efficient use of
resources, full employment, price stability, and a fair distribution of income.

-Samuelson et al 2010
What drives Economics?
Human wants and needs (Necessity)
primary necessity -Needs are based on physiological, personal or socio-economic requirements necessary for you to
function and live. Transportation is a need for the modern, urban person because work, food and other necessities of daily
life are too far from where they live.

Secondary necessity - Wants, on the other hand, are a means to fulfilling our needs. You may be able bike to work,
use public transportation or drive your own vehicle. While any of the choices will work, you want a car to fulfill your need
for transportation.

-Study.com
have a desire to possess or do (something); wish for.
Goods : A commodity, or a physical, tangible item that
satisfies some .
Goods are items that are tangible, such as pens, salt,
apples, and hats. Services are activities ... According
to economic theory, consumption of goods and services is
assumed to provide utility
A type of economic activity that is intangible, is not stored
and does not result in ownership. A service is consumed
at the point of sale. Services are one of the two key
components of economics, the other being goods.
Examples of servicesinclude the transfer of goods, such
as the postal service delivering mail, and the use of
expertise or experience, such as a person visiting a
doctor.
economic good
a product or service which can command a price when sold.

Utility is an economic term introduced by Daniel Bernoulli referring to the total satisfaction received from
consuming a good or service.
Utility is a term used by economists to describe the measurement of "useful-ness" that a
consumer obtains from any good. Utility is the want satisfying power of any commodity or capacity of a
commodity to give satisfaction.

Principles Of Economics Model

Economic value is a measure of the benefit provided by a good or service to an economic agent. It is generally
measured relative to units of currency, and the interpretation, is therefore "what is the maximum amount of money a
specific actor is willing and able to pay for the good or service"?

Economic value is one of many possible ways to define and measure value. Although other types of value are often
important, economic values are useful to consider when making economic choices – choices that involve tradeoffs in
allocating resources.
What were Adam Smith's three natural laws of economics?

1.)the law of self interest-people work for their own good.

2.)the law of competition- Competition forces people to make a better product.
3.)the of supply and demand-enough goods would be produced at the lowest possible
price to meet demand in a market economy
What drives Economics?
Scarcity and Efficiency

•Scarcity
Ours is a world of scarcity, full of economic goods. A situation of scarcity is one in which goods are limited relative to
desires.
Given unlimited wants, it is important that an economy make the best use of its limited resources. That leads to the notion
of efficiency ….

•Efficiency
Efficiency denotes the most effective use of a society’s resources in satisfying people’s wants and needs.
Economic Efficiency
Economic Efficiency requires that an economy produce the highest combination
of quantity and quality of goods given its technology and scarce resources.

An economy is producing efficiently when no individual’s economic welfare can be improved unless someone else is
made worse off.

The essence of economics is to acknowledge the reality of scarcity and then figure out how to organize society in a way
which produces the most efficient use of resources.
-Samuelson et al 2010
Subfields of Economics
•Microeconomics–Branch of economics which today is concerned with the behavior of individual entities such as markets,
firms and households.

•In his book Wealth of Nations (1776), Adam Smith identified the efficiency properties of markets and explained how the self-
interest of individuals working through the competitive market can produce a societal economic benefits.

•Macroeconomics –Branch of economics that is concerned with the overall performance of the economy.
•In his book General Theory of Employment, Interest and Money (1936), John Maynard Keynes developed an analysis of what
causes business cycles, with alternating spells of high unemployment and high inflation.

-Samuelson et al 2010
Three Key Problems of Economic Organization

•Every society must answer three fundamental questions:

•What?
•How?
•For whom?

•Whatkinds and quantities are produced among the wide range of all possible goods and services?
•Howare resources used in producing these goods?
•For whom are the goods produced (that is, what is the distribution of income and consumption among different individuals
and classes)?

-Samuelson et al
2010
Inputs & Outputs
• Every society must make decisions about the economy’s inputs and outputs.
• Inputs are commodities that are used to produce goods and services.
• An economy uses its existing technology to combine inputs to produce outputs.
• Outputs are the various useful goods and services that result from the production process and are either consumed or
employed for further production.

Factors of production
Economic term describing the inputs used to produce outputs for profit.
• Land –natural resources, raw materials coming from the land
• Labour–human time spent in production
• Capital –durable goods of an economy –buildings, machines, tools used in production, intellectual capital, social capital
• Entrepreneurship/Enterprise -this ties the other three factors together to come up with innovative ideas to make
companies profitable

…. Society must decide 1) what outputs to produce, and in what quantity; 2) how, or with what inputs or techniques, to
produce the desired outputs; and 3) for whom the outputs should be produced and distributed.

-Samuelson et al 2010
Opportunity Cost
-Samuelson et al 2010
In a world of scarcity, choosing one thing means giving up something else. The opportunity cost of a decision is the value of
the good or service forgone.

TASK
NOTE : Write one page on economic laws, economic goods, utility, value, price and wealth. its relevance to built
environment with example
ECONOMIC ORGANISATION OF SOCIETY
INTRODUCTION

The economic systems in the world today include subsistence models, capitalism,
planned economies and mixed models. All these systems help people’s needs and desires in
different ways.

Our planet resources are limited, and economic exploitation can can lead to the overuse
of resources and the creation of excessive amount of waste.

Future generations should work on this problem or we will not have enough natural
resources . We must all work together to consume the Earth’s resources responsibly.
HOW ECONOMIC ACTIVITY WORKS?
People have individual needs,
such as food, clothes, hygiene and
exercise, whereas society has
collective needs, such as
healthcare, justice, communication
and education.

WHAT IS ECONOMIC
ACTIVITY?
Economic activity describes all the
jobs done by workers in order to
satisfy the needs of people and
societies by providing goods or
services.
THE THREE PHASES OF THE ECONOMIC ACTIVITY
PRODUCTION

The company decides on the products to be produced, the amount and the
manufacturing process.
These products can be goods or services.

GOODS SERVICES

• Consumer goods, which • Healthcare, public transport,

satisfy the desires or needs of
the consumer, such as clothes
and furniture.
• Intermediate goods, such as
machines and tools, are used to
manufacture consumer goods
police,etc
• They require infrastructure and
the investment of the
government.
DISTRIBUTION
Distribution occurs after the production and consists of the
delivery of goods or services to the consumer. This involves:

Storage, transport, marketing, sale of goods. There are two steps in the sales

process:
WHOLESALE RETAIL

Wholesalers buy a large Retail businesses buy a

number of products and small number of gooods
sell them to companies, from wholesalers and sell
who then sell the goods to them directly to the
individual consumers public in shops
An example of distribution

AMAZON
CONSUMPTION

The buying of goods and services allows people to satisfy their needs. This means they
are able to consume products or use goods and services

People consume goods, such as food or drinks, and use

others, such as television or computers.
THE FACTORS THAT AFFECT PRODUCTION
THE KEY INGREDIENTS FOR THE PRODUCTION OF
GOODS ARE:

• NATURAL RESOURCES
• LABOUR
• CAPITAL
• TECHNOLOGY AND EXPERTISE
Natural resources
Nature gives us many elements that we transform to satisfy the
needs of human society. Because these resources are limited and
could run out soon, we need to make sure we do not overexploit
them.

LABOUR
Labour is all human activity, whether physical or intelllectual, that is
required to produce goods or provide services that are necessary for
people and society.
Capital
Capital includes all of the resources used to produce goods and services. There are two type of capitals:

Physical capital. This includes the land on which the business is built, the construction and maintenance of the
premises, and the machinery and raw materials needed for the production of goods and services. All this
requires a considerable investment.

Financial capital. Money needed to begin production. This includes loans of banks or other institutions.

Technology and expertise

Technical expertise makes possible the design, construction and use of machines and devices for the production
of goods and services.

We can distinguish three types of production according to this technology:

• Manual production
• Mechanical production
• Hi-tech production
Competitive companies require quality training program for the employees and also laboratories to reach new
technology and new products
THE ECONOMIC SECTORS
Economic sectors are so diverse that they have been traditionally divided into three large economic sectors. However, a
fourth sector has been recently added to this classification.

1. THE PRIMARY SECTOR

2. THE SECONDARY SECTOR
3. THE TERTIARY SECTOR
4. THE QUATERNARY SECTOR
The primary sector
This sector includes activities that produce food for consumption and raw materials for industry. It consists of
agriculture, livestock farming, fishing and forestry.

The secondary sector

This sector includes all economic activities that transform raw materials found in nature through industrial processes
into manufactured products. The main activities are:
Industry
Construction
Exploitation of energy sources
(water, oil, gas)

The tertiary sector

This sector includes a wide variety of activities. It does not produce material goods like the primary and secondary
sectors. It provides services to the population or to companies such as healthcare, education, transport, tourism,
trade and culture.

This sector is the fastest- growing sector due to the appearance and expansion of an information society, which has
aided the development of scientific and technical research, including on-line services and shops.

Almudena Corrales Marbán

The quaternary sector
This is a new economic sector based on expertise that includes activities related to the creation, distribution and
manipulation of information, ans also social, cutural and economic innovation and research. Workers in these fields need
special training
and high levels of expertise.
The use of advance technology
Manufacturing is the production of merchandise for use or sale using labor and machines, tools, chemical and
biological processing, or formulation. The term may refer to a range of human activity, from handicraft to high tech, but is
most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large
scale.
Or
make (something) on a large scale using machinery.
manufacturing process are the steps through which raw materials are transformed into a final product. The
manufacturing process begins with the product design, and materials specification from which the product is made.
These materials are then modified through manufacturing processes to become the required part.
A bank is a financial institution licensed to receive deposits and make loans. Banksmay also provide
financial services, such as wealth management, currency exchange and safe deposit boxes. There are two
types of banks: commercial/retail banks and investment banks.

Banking is an industry that provides a safe place to save. It also lends money. Those functions make it critical to the US
economy.
Marketing is the study and management of exchange relationships. Marketing is used to create, keep and satisfy the
customer. With the customer as the focus of its activities, it can be concluded that Marketing is one of the premier
components of Business

Marketing refers to the activities of a company associated with buying and selling a product or service. It includes
advertising, selling and delivering products to people.
The transportation sector is a category of companies that provide services moving people, goods, or the infrastructure to
do so. ... The transportation industry group consists of several industries including air freight and logistics, airlines, marine,
road and rail, and transportation infrastructure.

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