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 CHAPTER 1 : INTRODUCTION

1. DEFINITION OF ECONOMICS
2. SCOPE OF MACRO & MICRO
3. BASIC ECONOMICS CONCEPTS : SCARCITY,
CHOICE, OPPORTUNITY COST
 WHAT IS ECONOMICS??
Alfred Marshall's in his book
Principles of Economics says:
 
"A study of mankind in the
ordinary business of life; it
examines that part of individual
and social action which is most
closely connected with the
attainment and with the use of
the material requisites of
wellbeing. Thus it is on one side
a study of wealth; and on the
other, and more important side,
a part of the study of man."
 2 problems in economy
a) Productive resources which to produce g & s are limited
b) Human wants for g & s are unlimited

Economy has to decide how to use these resources

efficiently in order to attain the max possible satisfaction
for the members

SO → ECONOMICS is a study of production and

distribution of goods and services. It is a study of
human efforts to satisfy his/her Unlimited wants
use his/her LIMITED resources
 MICROECONOMICS MACROECONOMICS
Deals with "smaller"
Deals with "larger" issues
issues
The study of decisions The field of economics that
that people and studies the behavior of the
businesses make economy as a whole and not
regarding the allocation of just on specific companies,
resources and prices of but entire industries and
goods and services. economies.
Example:
Example:
Consumer behavior,
Inflation, unemployment,
market behavior, costs of
economic growth, and the
a business, competition
measurement of these topics
among firms,
 ECONOMIC CONCEPTS
1. SCARCITY
• The fundamental economic problem facing by ALL societies.
Essentially it is how to satisfy unlimited wants with limited resources.
This is the issue that plagues all governmet and peoples.  

• Basically all resources will be use to produce goods and services.

However, since human unlimited wants exist, these resources or
factors of production are scarce/ limited. They are:

1. Land represents all natural resources.

2. Labor is all of the work that laborers and workers perform at all
levels of an organization.
3. The entrepreneur is the individual who takes an idea and
attempts to make an economic profit and bear all the losses
from it by combining all other factors of production.
4. The capital is all of the tools and machinery used to produce a
good or service.
 ECONOMIC CONCEPTS
2. CHOICE
 
Since we have limited resources, we have to
make one decision, To choose which goods that
we enjoy more.
 
For example: You only have RM5 for having your
lunch, but you want to eat Nasi Ayam and Mee
kari. Since your resources are limited, you need
to choose only one.
 ECONOMIC CONCEPTS

3.OPPORTUNITY COSTS
 
The cost of an economic decision. Opportunity
cost is the benefit that is lost when you are
making a choice between two options.
 
→ The NEXT BEST thing that we have to forgo
For example: You decide to go for Nasi Ayam,
meaning that, Mee Kari is your opportunity cost.
 BASIC ECONOMIC PROBLEM
i) What to produce

• know that resources are scarce in relative to

human wants

• economy must choose among diff alternative

combinations of g & s

eg : more good x, less good y

ii) How much

• how much – determine the quantities needed by

society at particular time

iii) How to produce

• how – choose the best efficient methods

eg : K intensive @ L intensive

iii) For whom to produce

• society must have a method to decide who will be

rich & famous ( poor & unknown)
END OF CHAPTER 1