ECONOMICS

HSS 301

Lecture - 2
 Resources are scarce but human
desires are unlimited

Everything starts from this core

Scarcity problem for humankind

Scarcity is the inability of our

limited resources to satisfy
unlimited human desires.
Thus, we need to conduct
economic activity
 Production

Economic
Activity Distribution

Consumption
 Assets or services used to
Resources produce new goods &
services that meet human
needs & wants
 Renewable
Natural
Non-Renewable
Machineries

Vehicles
Resources Capital
Information

R&D

Businessman

Human Professional

Employee
 Land

Labor
4 Factors of
Production
Capital

Entrepreneurship
 Physical Space &

Land
Natural resource
 Ability to work
Labor
Human resource
 Tools/Equipment

Machineries

Capital Vehicles

Information/R&D

Liquid Cash
 Gathers other resources

Entrepreneurship/ Manages the production

Enterprise process

Carry the output into the

market
 Process of combining various
material & immaterial inputs in order
to make something for consumption.

Production The act of creating output

Economic wellbeing is created in

the production process
 Good or Service which
Output has value & contribute to
the utility of individuals
 State of being useful or beneficial
Utility
Level of satisfaction
 What to Produce

Three
Fundamental How to Produce
Problems

For whom to produce

Need, Want & Demand
Needs
States of Deprivation

Physical needs: food, clothing, shelter, water, safety

Social & cultural Needs: belonging & affection

Individual Needs: knowledge & self expression

Wants

Needs shaped by cultural & individual preferences

becomes want

Desire of product or services that aren’t essential for

us to survive
 Having the desire for a
product or service

Having the ability to pay

Demand
Having the willingness to pay
 • The amount you give up to
get something
Opportunity
Cost
• Value of the second-best
alternative
Example of
Explicit &
Implicit
cost
Thank You