Introduction to Economics and Microeconomics

What is Economics?

• Derived from Greek: oikos (house) & nemein (manage)
• Study of how societies utilize scarce resources for valuable commodities (Paul Samuelson)
• Focus on resource management to fulfill needs and unlimited wants (Philani Dludla)
• Involves analysis of economic phenomena: growth, unemployment, inflation, trade, prices, poverty, etc.

Microeconomics vs Macroeconomics

Microeconomics

• Focus on individual parts of the economy (individual consumers & firms)
• Examines specific markets and pricing of goods/services (e.g., petrol, maize)

Macroeconomics

• Concerned with the economy as a whole (aggregate behavior)
• Studies overall factors: economic growth, unemployment, inflation, balance of payments, and income distribution

Scarcity and Factors of Production

• Scarcity: Unlimited wants vs. limited resources
• Factors of production:
  • Land: Natural resources
  • Labour: Physical & mental work
  • Capital: Man-made goods (physical) & skills (human)
  • Entrepreneurship: Individuals starting businesses and innovating

Economic Decisions

• Choices must be made due to scarcity; some wants remain unsatisfied.
• Opportunity Cost: The value of the best alternative sacrificed (e.g., choosing study over movies)

Production Possibilities Curve (PPC)

• Illustrates scarcity, choice, and opportunity cost
• Shows trade-offs: producing more of one good means producing less of another
• Increasing opportunity cost: Resources suitable for one good become costlier to divert to another (e.g., potatoes to fish)
• Points inside PPC indicate inefficiency; on the curve represent full employment of resources.

Summary of PPC Concepts

• Scarcity: Points outside the curve are unattainable.
• Choice: Need to choose combinations on the curve.
• Opportunity Cost: Illustrated by the slope of the curve; more of one good requires sacrificing another.