List ten (10) things which you

can’t live without

INTRODUCTION TO
ECONOMICS
Choices, Choices, Choices, . . .
 WHAT IS ECONOMICS?
Economics – the study
of how individuals and
societies make
decisions about ways
to use scarce
resources to fulfill
wants and needs.
 WHAT IS ECONOMICS?

It can be define in many

ways. It comes form the
greek word “oikanomia”
meaning “household
management”.
 What is Economics?

Economics is the branch of

knowledge concerned with the
production, consumption and
transfer of wealth.
It is the study of how scarce
resources are allocated to fulfill the
infinite wants of consumers.
 Adam Smith (1723 – 1790)
O Known as father of modern economics
O Published “The Wealth of Nations”
in 1776
O Smith believed in “free market”
(free market is one where consumers may buy
what they like and producers may produce
what they like, with no government
interference)
Smith suggested that a laissez-faire (don’t interfere)
approach should be followed, leaving customers and
producers to make their own decisions
 Branches of Economics
Macroeconomics
– The big picture: growth,
employment, etc.
– Choices made by large
groups (like countries)

Microeconomics
– How do individuals make
economic decisions
Microeconomics focuses on issues
that affect individuals and
companies. This could mean
studying the supply and demand
for a specific product, the
production that an individual or
business is capable of, or the
effects of regulations on a
business.
Macroeconomics focuses on
issues that affect the economy as
a whole. Some of the most
common focuses of
macroeconomics include
unemployment rates, the gross
domestic product of an economy,
and the effects of exports and
imports.
The difference between micro and
macro economics is simple.
Microeconomics is the study of
economics at an individual, group
or company level.
Macroeconomics, on the other
hand, is the study of a national
economy as a whole.
 ECONOMICS: 5 Economic
Questions
Society (we) must figure out

WHAT to produce (make)

HOW MUCH to produce
(quantity)
HOW to Produce it
(manufacture)
FOR WHOM to Produce
(who gets what)
WHO gets to make these
decisions?
 What are resources?
Definition: The things used to make other
goods
 BUT, there’s a
Fundamental Problem:
SCARCITY: unlimited wants and
needs but limited resources
Choices, Choices

Because ALL resources,

goods, and services are
limited – WE MUST MAKE
CHOICES!!!!
 Why do we need to choose?

We make choices about how we spend our

money, time, and energy so we can fulfill
our NEEDS and WANTS.

What are NEEDS and WANTS?

 Wants and Needs,
Needs and Wants
NEEDS – “stuff” we must have to survive,
generally: food, shelter, clothing

WANTS – “stuff” we would really like to

have (Fancy food, shelter, clothing, big
screen TVs, jewelry, conveniences . . .
Also known as LUXURIES
VS.
Classify among
the listed things
if it falls under
the needs or
wants.
 TRADE-OFFS
You can’t have it all (SCARCITY –
remember) so you have to
choose how to spend your
money, time, and energy. These
decisions involve picking one
thing over all the other
possibilities – a TRADE-OFF
 Methods of Inquiry
1. Normative economics -- Studies the
way the world should be. Employed to
make judgement about the economy and
suggest solutions to economic problem
Ex: Should there be a new tax on gasoline?
Should there be an increase in the minimum
wage?
What should the price of rice be?
Introduction slide 20
 Methods of Inquiry

Positive economics-- Studies the way the world

is. Explain what happens in the economy and
why, without making any recommendations
to economic policy, or in simple idea, it deals
how the economy works.
Ex: How much will a new gasoline tax raise the
price of gasoline?
Will an increase in the minimum wage increase
Introduction slide 21
unemployment?
 Analysis
What is your own
idea about
economics?
Introduction slide 22
 Abstraction
What is the definition
and field of
economics?
Introduction slide 23
 Application
Cite specific situation in your
life where you apply the
economics principles of
Macro and Microeconomics
Introduction slide 24
 Assessment
Concept mapping:
Economics
Introduction slide 25