Introduction to Economics

Objectives:
1.Explain the concepts of scarcity and choice within an
economy.
2.Understand the consequences a choice has on an
individual.
3.Define “opportunity cost”.

4.Illustrate opportunity cost using a production possibility

curve.

Retrieved and modified from: www.bized.ac.uk

Give Your Opinion
 According to Emerson: “want is a
growing giant whom the coat of Have
was never large enough to cover.”
 Why does “want” exceed “have”?
 https://padlet.com/sunebethelmy/
econproblem

Retrieved from: http://econ.economicshelp.org/2008/09/economics-and-scarce-resources.html

Introduction to Economics
 Listen to the following video clip and answer the
following questions:
 https://www.youtube.com/watch?
v=Um0yvrvY0Y8&list=PL1YVYQeHoZI1yx8ZgBiN7fpnScQxMeZ
n6
 Questions:
1. Define the term Economics.
2. Define the term Scarcity.
3. Why can’t everyone get what they want in the world?
4. Why must choices be made?
5. What are the 3 essential economic questions?
6. Why do we have to give up something when we make
choices?
7. Define the term Opportunity Cost.
8. State the 3 economic laws.
Definitions
 Economics is defined as a social
science that analyses how to allocate
scarce or limited resources among
unlimited wants.
 An economy is the utilization of
resources to produce goods and services
to meet the needs and wants of society.
 An economic good is a commodity or
service that is useful to man but that
must be paid for.
 The Economic Problem - Scarcity
 Unlimited Wants
 Scarce
Resources –
Land, Labour,
Capital
 Forced to make
Choices

Pic. of extraction of oil. Retrieved from,

www.enviroblog.org/mining/
The Economic Questions
 What goods and services should an economy
produce? – should the emphasis be on
agriculture, manufacturing or services, should it
be on sport and leisure or housing?
 How should goods and services be
produced? – labour intensive, land intensive,
capital intensive? Efficiency?
 Who should get the goods and services
produced? – even distribution? more for the
rich? for those who work hard?
Opportunity Cost
 What are you giving up when you
purchase an iphone?
 Definition – what you forego in order
to obtain the next best alternative.
 Helps us view the true cost of decision
making.
 Implies valuing different choices.
Activity – What yuh want darlin’ -
Doubles or Pie?
 Your allowance is $10.
 One doubles cost $2.

 One pie cost $2.

Let’s represent this diagrammatically.

 Representing the Combination of
Choices
Draw this table in your notebooks and fill in the missing figures:

Table 1: Combination of Goods

Doubles Pies
A 0 5
B 1 4
C 2 3
D 3 2
E 4 1
F 5 0
Graphing Opportunity Cost

A
B
C

D
E

F
The Production Possibility Frontier
 Look at the following video clip:
 https://www.youtube.com/watch?
v=O6XL__2CDPU
 Questions:
1. What do points along the curve
represent?
2. What do points inside the curve
represent?
3. What do points outside the curve
represent?
Production Possibility Frontiers
 Show the different combinations of
goods and services that can be
produced with a given amount of
resources;
 Any point on the curve – points of
efficiency;
 Any point inside the curve – suggests
resources are not being utilised efficiently or
unemployment of resources;
 Any point outside the curve – not
attainable with the current level of
resources or scarcity.
Summary of Points on the PPF
Types of Opportunity Costs
 Increasing Opportunity Costs
 Constant Opportunity Costs
 Decreasing Opportunity Costs
 What type of curve illustrates
the label below?

Increasing
opportunity
cost
per unit of
good B
 What type of curve illustrates
the label below?

Increasing
opportunity
cost
per unit of
good B
 What type of curve illustrates
the label below?

Constant
opportunity
cost
per unit of
good B
 What type of curve illustrates
the label below?

Constant
opportunity
cost
per unit of
good B
 What type of curve illustrates
the label below?

Decreasing
opportunity
cost
per unit of
good B
 What type of curve illustrates
the label below?
Impossible;
Decreasing not
supported
opportunity by
cost economic
theory
per unit of
good B
Definitions
 Increasing Opportunity Cost:
 You give up more and more of one
good as you gain more of the other.
 Constant Opportunity Cost:
 You give up the same amount of one
good as you gain more of the other.
 Decreasing Opportunity Cost:
 You give up less and less of one good
as you gain more of the other.
Quick Quiz
 Go to joinmyquiz.com for a quick
quiz. A code will be given to you.
Evaluation
 Attempt Past Paper Questions:
 June 2019 Q1a
 June 2018 Q1d
How can we get outside the curve?
 Why is the PPC
concave?
 What does point (A),
inside the PPC
illustrate?
 What is the
significance of point
(X), outside the PPC?
 Under what conditions
can point X be
reached?
Shifting the PPF

Moving from point B

to point A, could
eventually expand
the frontier from
G,G to H,H
Shifting the PPF
 Listen to the following video clip and
write down the factors that would
cause a shift outwards or a shift
inwards:
 https://www.youtube.com/watch?
v=FwPiWz1a1Tw
Factors that shift the PPF
Outwards
 Increases in Technology
 Increases in Productivity
 Increases in Education
 Increases in International Trade
 Increases in Resources
Evaluation

Attempt Past Paper Questions:

June 2008Q8a-c

June 2012 Q1d

June 2013 Q8c

June 2014 Q1

June 2015Q8a,b,d
Follow up Lesson
 Economic Decisions