introduction to economics and basic economic concepts

what is economics

economics is the social science which studies the behaviour of the human being in the fields of production,distrubution, and the consumption of goods and services when they attempt to fulfill their unlimited wants with a limited amount of resources.

is economics considered as a permanent truth?

no.

why is economics known as a social science?

as economics is the subject we learn about the logical behaviour of human being when they are trying to satisfy their physical needs and wants, we identify economics as a social science

why is economics not a natural science?

due to inability to carry out experiments in a factor controlled enviroment.

why is economics not an art?

art is a formal set of facts which do not follow a scientific method but economics follows a scientific method.

logical conclusions are made based onthe logical analyses and the real world behaviour.

what is the mismatch that is found in every society in this world?

the mismatch between the availability of the resources and the wants to be satisfied by using those resources.

what is the difference between economics and other social sciences?

in different social sciences, the behaviour of human being in different fields is disscussed. but in economics the physical behaviour of human being is discussed.

importance of learning economics

→creates an ability to understand the economic behaviour of a society

→important to become a successful citizen

→important when ruling a country

→important in efficient decision making as consumers, producers, and investors

→important when making political decisions such as voting for a certain political party

→important in decisions regarding higher education

major facts to be aware when learning economics

economic reasoning

economic terminology

economic theory

economic institutions

economic policies

what is positive economics

the positive statments can be right or wrong. it can be proven scientifically

whats normantive economics

these are based on personal judgements. subjective statements/ value judgements. these cannot be proven scientifically with facts whether they are true or false

what is the law of demand

as the price of a good or service increases, the quantity demanded will decrease, and vice versa

what is the law of supply

an increase in the price of goods or services results in an increase in the quantity that suppliers make available to the market

what is microeconomics?

Microeconomics is the branch of economics in which the behavior of individual economic variables is studied.

the behavior of households, production firms, etc are studied

eg; consumer demand, supply of a good, scarcity, choice, oppurtunity cost.

what is macroeconomics?

is the branch of economics in which the behaviour of aggregrate economic variables is studied.

in macro economics the entire economic system is taken as a signle unit and its structure, performance and the behaviour is studied.

eg; rate of inflation, money supply, economic growth, gross domestic product, foriegn exchange rate.

aggregate

form/ group into a class or a cluster

examples for microeconomics

consumer demand

supply of a good

scarcity

choice

opportunity cost

examples for macroeconomics

rate of inflation

money supply

economic growth

gross domestic product

foriegn exchange rate

human needs

the basic neccesities that should be fulfilled by human being in order to survive are identified as human needs

main features of human needs

Essential

common

limited

human wants

human wants are the different forms of fulfilling human needs

main features of human wants

unlimited and complicated

diverse

change along with the time

new wants can be created within the people

factors creating diverstity among wants

geographical disparities

demographical disparities

religion, culture and social differences

scarcity

the limitedness of the resources when compared with the unlimited human wants

common problem faced by every society

scarcity

factors to be considered with the concept of scarcity

scarcity is a comparative concept

scarcity is a common problem for every society

is a different concept from poverty

is the foundation for economics

scarcity is a comparative concept

compared with the unlimited human wants

is a different concept from poverty

both rich and poor people face scarcity

Where there is no scarcity, can there be economics?

no, in such society every good should be able to buy at a zero price then therefore there is no need of economics for such a society.

what is the foundation of economics

scarcity

the problem of choice

since the available resources at a given point of time are limited and human wants are unlimited, deciding which human wants to satisfy with the available limited resources is identified as the problem of choice

factors which affect for the problem of choice

scarcity of resources

existence of alternative uses of those resources

basic economic problems / choices

what to produce in which quantities?

how to produce?

whom to produce?

is economics identified as a science of choice and why?

yes,