INTRODUCTION TO

ECONOMICS
The Economic Problem
Opportunity Cost
Production Possibility Frontiers
 The Economic Problem
UNLIMITED
WANTS

SCARCE
RESOURCES

CHOICE

LIMITED RESOURCES

LAND • RENT
LABOUR • WAGES
CAPITAL • INTEREST
ENTERPRISE • PROFIT
Opportunity Cost • What goods and services should an economy produce?
– should the emphasis be on agriculture, manufacturing
the cost expressed in WHAT or services, should it be on sport and leisure or housing?

terms of the next best

alternative sacrificed • How should goods and services be produced? – labour
intensive, land intensive, capital intensive? Efficiency?
HOW

• Who should get the goods and services produced? –

even distribution? more for the rich? for those who work
WHOM hard?

The Economic Problem

Positive and Normative Economics

 Positive and Normative Economics
• Positive
Statements:
– Capable of being verified
or refuted by resorting to
fact or further
investigation
Positive and Normative Economics
• Health care can be improved
with more tax funding
• Positive
Statements:
– Capable of being verified
or refuted by resorting to
fact or further
investigation
• Normative
Statements:
– Contains a value judgement
which cannot be verified by
resort to investigation or
research
Positive and Normative Economics
• Positive
Statements:
– Capable of being verified
or refuted by resorting to
fact or further
investigation
• Normative
Statements:
– Contains a value judgement
which cannot be verified by
resort to investigation or
research
Positive and Normative Economics
• Health care can be improved
with more tax funding
• Positive
• Pollution control is effective Statements:
through a system of fines – Capable of being verified
or refuted by resorting to
fact or further
investigation
• Normative
Statements:
– Contains a value judgement
which cannot be verified by
resort to investigation or
research
 Positive and Normative Economics
• Health care can be improved
with more tax funding
• Pollution control is effective
through a system of fines
• Society ought to provide
homes for all
Positive and Normative Economics
• Health care can be improved
• Positive with more tax funding
• Positive
Statements: • Pollution control is effective Statements:
– Capable of being verified through a system of fines – Capable of being verified
or refuted by resorting to or refuted by resorting to
fact or further fact or further
investigation investigation
• Society ought to provide
• Normative homes for all • Normative
• Any strategy aimed at reducing
Statements: factory closures in deprived Statements:
– Contains a value judgement areas would be helpful – Contains a value judgement
which cannot be verified by which cannot be verified by
resort to investigation or resort to investigation or
research research

Micro & Macro economics

• The field of economics
• The branch that studies the behavior
of economics that of the aggregate
analyzes the market economy.
behavior of individual Macroeconomics examin
consumers and firms es economy-wide
phenomena such as
in an attempt to
changes in
understand the unemployment, national
decision- income, rate of growth,
making process of gross domestic product,
firms and inflation and price levels.
households.
Thank you!!!