Economics

What is Economics?

 Economics is known as a social science.

 This means that it is the study of people in society and
how they interact with each other.
 Other social sciences include sociology, political science,
psychology, anthropology, and history.
 Human needs and wants are infinite.
 Economics is the study of rationing systems.
 Needs are things we must have to survive
 Scarcity exists because of the conflict between the finite
resources available to the world’s population and its
infinite material needs and wants.
 To the economist, all goods and services that have a price
are relatively scarce, which means they are relatively
scarce to people’s demand for them.
 If a product is called economic this means its rationed by
price.
 Choices are made due to scarcity.
 Economics is the study of choice that people make in
overcoming the problems that arise because the resources
are limited, while wants and needs are unlimited.
 Economic Agents
 Humans are considered as economic agents
 Whenever a choice is made by an economic agent
concerning the use of its resources, something is given up
or sacrifices.
 Opportunity cost is defined as the next best alternative
foregone when an economic decision is made. (what you
give up in order to have something else)
 Opportunity cost is also known as a Tradeoff and isn’t
expressed in monetary terms.
 In most situations there is an opportunity cost whether
its due to money, or resources and even time to
participate in something, and so on. Maybe one person
isn’t losing something, but another person/group is.
However, limitations may occur due to situation.
 In economics the only things that can be considered to be
free are those things that are so abundant there is no
scarcity.
 Economic Good: something that is scarce or rationed by
price whose use involves an opportunity cost.
 Sustainanility: utility of a resource efficiently in order to
achieve the longest lasting results.

 The three questions that represent the basic economic

problem:
What Should be produced and in what quantities?
How Should things be produced?
For whom should things be produced?

 The two theoretical allocation (rationing) systems are

the free market and the planned economy and they are
theoretical because they are never pure.
 All economies are mixed due to the fact there aren’t any
pure economic systems in this world.
Microeconomics: Smaller and discrete agents and how they
make their choices in response to change in a dynamic world.

Looks at the way consumers and producers come together in

an individual market.

Choices in order to improve their well beings given their budget

constraints.

Macroeconomics: looks at the factors impacting the economy

as a whole such as economic growth and the way that well-
being is impacted by economic growth. Such as the economic
problems of jobs and the people who lose their jobs.

Inflation and deflation are involved in macroeconomics.

Economies intervene in microeconomies in order to promote

sustainability, avoid the abuse of market influence, and to
assure the well-being of the consumers. Raising taxes on high
income receivers, maybe reduce the levels of unemployment.

Nine central concepts:

 Scarcity: refers to the limited availability of economic
resources relative to society’s unlimited demand for goods
and services. Hence, economics may be defined as the
 human relation between wants and needs, and scarce
resources.
 Choice: Economics is a study of choice due scarcity]
 Efficiency: quantifiable concept determined by the ratio of
useful output to total input.
 Allocative efficiency refers to the best possible usage of
resources.