FORM 4

ECONOMICS
SESSION 3
 Home Work Session 1
1. Define the term Economics.

2. Define the term Economy.

3. State TWO examples of economic goods.

 Home Work Discussion
1. Economics – the study of how scarce resources are allocated, given the
unlimited wants of a society.
2. Economy – is a system of production, distribution and consumption
3. Examples of an economic good may come from the following:
Food Clothing Housing Education
Note: Example provided must have an opportunity cost.
4. Egbert does not have enough time to type his patients’ information and carry
out his dental tasks. Thus, time is a scarce resource. If Egbert continues to type,
he will lose the opportunity to satisfy his patients and in the long run, revenue
since these patients might seek alternate care with other dentists specializing in
the same area as Egbert. Thus, Egbert should hire a secretary because his
opportunity cost of typing is high. The secretary’s opportunity cost is lower since
she will have to give up less for each hour she spends typing.
Home Work
Home Work Discussion
1. Opportunity Cost (OC) – Refers to what is given up to obtain an item or what an individual must forgo
in order to get something

2. Three groups that make choices in an economy:

• Individuals/households
• Firms/producers/suppliers/private sector
• Government/public sector

3. The opportunity cost of Good Y increases as the production of Good X increases or as more of the good
is produced the value of forgone production of Good Y increases.
Learning Objectives
1. Explain the shape of three ppf graph.
2. Explain the factors that shift the ppf
Understanding different shapes of the PPF
 FACTORS THAT CAN SHIFT THE PPF INWARDS AND OUTWARDS
OUTWARD SHIFT INWARD SHIFT

1. Discovery of new natural resources 1. Depletion of natural resources (natural diasters)

2. Advancement in technology (Investment in 2. Obsolete/Outdated technology

capital i.e. plant and machinery and new
technology) 3. Decrease in popuation (Outward migration of
3. Increase in popuation (Inward migration of younger, skilled workers)
4. Decrease in labour productivity (decrease
younger, skilled workers)
output per unit of input)
4. Increase in labour productivity ( through
improved education, training and healthcare as
well as innovations that increase output per unit
and reduce resource wastage
PIVOT OF A PPF
Using a PPF with bananas on the x-axis and laptops on the y-axis, illustrate the effect on the PPF if the
government decides to grant subsides to banana producers to increase the production of bananas only.

Laptops

0 B1 B2 Bananas
Factors Affecting
Economic
Decisions Of
Economic Agents
Factors Affecting Economic Decisions of Households/Individuals
Factors Affecting Economic Decisions Of Firms/Businesses
Next class
 Economic decisions
 Production and productivity
Home Work
 Do study guide questions, textbook and past paper questions on Section 1.

 Read chapter 2