Business Economic

SS2021

Dr. Dina Yousri

Assistant Professor of Economics
Economics Department , Faculty of Management Technology
German University in Cairo

Dr. Dina Yousri 1

Mid-term Revision

Dr. Dina Yousri 2

 What is Economics?
Economics is the study of how society manages its scarce resources.

Economics is the science of economic problems. It studies how to allocate

scarce resources efficiently to satisfy needs and wants.
What is Economics?Cont’d

Scarcity means that society has limited resources and therefore cannot
produce all the goods and services people wish to have.

Efficiency means society gets the most that it can from its scarce
resources.
 Economic problem vs. Economic problems:

Economic Problem:

It is the problem of how to use or allocate scarce resources efficiently in

order to satisfy needs and wants.
It is something common that faces the whole world.
Example: If I have a piece of land, will I build it or cultivate it?
 Economic problem vs. Economic problems:

Economic Problems:
These are problems that abstract the growth of countries.
It is something not common that all countries face the same problems.
Example: Unemployment problem, Inflation problem, trade deficit problem.
 Economic Problem: unlimited needs + limited resources

It is a problem around the world, which is how to allocate resources

efficiently.

Economics is the science that helps in giving rational decisions concerning

economic problem.
 Needs and Wants: (Consumption side)

Needs: Human needs representing the basic needs for an individual to survive
such as food, cloth, shelter.

Wants: Human wants are what an individual demands according to social or

cultural factors; such as education and entertainment.
 Resources: (Production side)
These are the factor of production:
1. Land
2. Labor
3. Capital( Assets, Machinery, etc)
4. Entrepreneurship
 Microeconomics VS. Macroeconomics:

Economics Science is divided to two main branches:

Microeconomics: focuses on the individual parts of the economy.

Macroeconomics: looks at the economy as a whole.

 Positive VS. Normative Analysis:

Positive statements are statements that attempt to describe

the world as it is.
Called descriptive analysis
Normative statements are statements about how the world
should be.
Called prescriptive analysis
 Production( Engine Box)

Inputs ( Factors of production) in addition to Money ( Source of Finance) are

used to produce goods and services.

Working Productive Economy will absorb consumption on the other side non
active economies will suffer increase in prices(Inflation).
 National Income

 Total amount of money earned due to production.

 The higher the production the higher the national income.

 In active/ productive economies income generated is reinvested in production , causing

increase in;
 GDP and economic Growth
 Employment
 Value added
 National Spending
 Income earned could be either saved or consumed depending on the Country’s Economic Status.
 Household may either consume domestically(Domestic Production) or internationally (Imports).
 Problems of non-active economies ( Leakage);
 Spending on a non productive activities/assets (Land, Property, etc)
 Saving at home or saving money in a form of foreign currencies(US dollars).
 All income generated spent abroad (imports of foreign goods) stimulating foreign economies.
 Economic Phases
Cont’d

Money and Factor of Productions

Production
Land
(Output) National Income
Labor
Goods and Service
capital

Income reinvested in Production