BUS-101

Chapter 3: Economic Challenges Facing

by Business

Instructor: Shegofta Shabnom (SgS)

What are Natural Resources?

Are Natural Resources Limited?

What Human Being’s Want?

Are those want Limited?

Matching
HUMAN
BEING’S WANT RESOURCES
What is Economics
Branch of Social Science

It studies how we allocate the limited resources to

satisfy unlimited wants of human beings

Analysis of the choices people and governments make

in allocating scarce resources.

Study of Choice under conditions of Scarcity
What is Scarcity?
Resources are insufficient to satisfy all human wants.
E.g., crude oil

Limitations force each of us to make choices

What is Choice?
Which restaurant will you go for lunch?
What would you like to study at university?
What will you buy with TK 1000? CD or dress ?

It can be domestic or international.

Branches of Economics
1) Microeconomics
 Micro means small
 The study of small economic units, such as individual
consumers, families, and businesses and choices they
make

2) Macroeconomics
 Macro means large
 Study of the economy as a whole
 Addresses how government policies affect people’s life
 Microeconomics
Business is exchange between buyer and seller

Buyer recognizes his/her Wants for goods and services

Seller provides the buyer’s want to earn profit

The exchange process arises Demand & Supply concept

Demand = willingness and ability of buyer to purchase at different prices

Supply = amount of goods and services for sale at different prices

Factors Driving Demand

1. Price : price move up, less demand

2. Consumer Preference : variations available

3. Outside circumstances/economic events : prices of other

goods may influence

Balance between what we want and

what we can afford
 Law of Demand
All other factors being equal, the price of a goods/services goes
up, demand for the good/services decreases and vice versa.

Demand Curve: Graphical Presentation

It is a graph showing the amount of a product that buyers will
purchase at different prices

The graph shows a downward sloping curve

Demand Curve
Changes in Demand Curve
1. Movement along the curve
 When only changes in the price
2. Shifts in the curve
Supply Curve
Shows the relationship between different prices and the quantities that sellers will

offer for sale, regardless of demand. As the prices rises, quantity to sell rises too.

Hence, it is an upward sloping curve

Factors Driving Supply
Movement along the supply curve due to Prices

Shift of the curve due to Factors of production(input), forces of nature and

others are shown below.
How Demand & Supply Interact
 Supply and demand curves meet at the Equilibrium Price.
 Buyers and sellers make choices that restore the equilibrium price.
 Changes affect both supply and demand.