Course Title: Building Economics

Prepared by

Ishraat Wahid
 Outline of the Lecture 1, 2 & 3
• Basic concept of Economics and how it is relates to
Arichitecture
• Branches of Economics – i.e; Microeconomics &
Macroeconomics
• Economics decisions, how it impacts the economy and
associated economic problem
• Types of economic resources
• Ten Principles of Economics
What is Scarcity?

It deals with we cant have everything as much as we

like to have, that limits keep us from having
everything.

Because resources are scarce, they are hard to find.

“Restricted in quantity”
We cannot have everything we dream
For example: Money
You don’t have enough money to buy both
Time is another scarce resources
You want work or study
You want to play your fav. video games as well
You want to do both:
24 hours a day
You need to do one thing at a time by
cutting another ……and do schedule
So…economics is a study of how people make
decisions
Given the scarce resources that are provided to
us – it is not just about….
Economics is the study of how societies,
governments, businesses, households, and
individuals allocate their scarce resources.
Society
Economics is how our society as a whole
uses it’s resources.
 Microeconomics
• Is the study of individual markets (a market is an
arrangement which links buyer and sellers)
• For example: an economist may study the market for
compact discs.
• This will involve looking at the decisions and behavior
of people who buy compact discs, the firms that sell
the compact discs and any other groups which
influence the price and availability of compact discs,
such as government.
• Studying the small portion of economy means MicroE.
 Macroeconomics

• While macroeconomics is the study of the whole

economy, it includes looking at unemployment,
overseas trade and government policy.
• Studying larger portion of economy is MacroE.
 Econometrics
• Economics has its own branch of statistics that
specialize to analyse economic data.
• In addition to these three major branches, numerous other
subfields exist in the economics discipline. Many subfields
cannot be neatly categorized under microeconomics or
macroeconomics because they utilize some tools and analytical
frameworks from both branches.

• Some of the more well-known subfields in economics include

behavioral economics, energy economics, game theory, health
economics, welfare economics, labor economics, economic
geography, development economics, international economics
and information economics.
 Why do we need to study economics?

• Economics is the study of how societies use scarce

resources to produce valuable commodities and
distribute them among different people. Behind this
definition are two key ideas in economics: that goods
are scarce and that society must use its resources
efficiently.
Classroom Activity questions???
Inside Architect’s Head
 What is an economic decision?

• Economic decision making is the process of

making business decisions involving money. The
purpose of making these decisions is generally to
come up with strategies that help to either make
the company more valuable or to increase the
owner's revenue.
What is micro economics and how does it impact?

• Microeconomics is the branch of economics that

considers the behavior of decision takers within the
economy, such as individuals, households and firms.
The word 'firm' is used generically to refer to all types
of business.
 What are the four types of economic resources?

• The four types of economic resources are labor, land,

capital and entrepreneurship. These resources are
also called the factors of production.

• Labor refers to the workers involved in production.

Land pertains to all natural physical resources,
including all raw materials used in the manufacture of
goods and services. Capital increases the productivity
of human input. Entrepreneurship oversees the entire
operation.
 The economic problem

• All societies face the economic problem, which is the

problem of how to make the best use of limited, or
scarce, resources. The economic problem exists
because, although the needs and wants of people are
endless, the resources available to satisfy needs and
wants are limited.
The economic problem is to match limited resources to
unlimited wants & needs

Limited Unlimited
scarce Production wants &
resources needs
Resources are limited in two essential ways:

• Limited in physical quantity, as in the case of land,

which has a finite quantity.

• Limited in use, as in the case of labor and machinery,

which can only be used for one purpose at any one
time.
 Choice and opportunity cost
• Choice and opportunity cost are two fundamental
concepts in economics. Given that resources are
limited, producers and consumers have to make
choices between competing alternatives. All economic
decisions involve making choices. Individuals must
choose how best to use their skill and effort, firms
must choose how best to use their workers and
machinery, and governments must choose how best
to use taxpayer's money.
 Opportunity cost

• Making an economic choice creates a sacrifice because alternatives

must be given up, which results in the loss of benefit that the
alternative would have provided.
• For example, if an individual has £10 to spend, and if books are £10
each and downloaded music tracks are £1 each, buying a book means
the loss of the benefit that would have been gained from the 10
downloaded tracks.
• Similarly, land and other resources, which have been
used to build a new school could have been used to
build a new factory. The loss of the next best option
represents the real sacrifice and is referred to as
opportunity cost. The opportunity cost of choosing
the school is the loss of the factory, and what could
have been produced.
• It is necessary to appreciate that opportunity cost
relates to the loss of the next best alternative, and not
just any alternative. The true cost of any decision is
always the closest option not chosen.
Principle # 7
Principle # 8
• Low unemployment - high inflation (fall in value of
money)
> High utilization of labor market, workers are in strong
position to press for high wages
>Employers raise wages to retain employees
>When employers increase wages you are increasing
buying power for workers
>Thus increasing their demand for goods and services
• High unemployment – low inflation
> Workers compete for each job and wage is keep down
So it could be argued, This curve implies that
govt can choose its preferred combination of
unemployment and inflation.

For example, it can decide to aim for low

unemployment if it is prepared to accept high
inflation and vice versa.
Class discussion
Questions???
Answer: