ECONOMICS

ECONOMICS

Economics is the ultimate law.


Economics

“A social science that studies and seeks to allocate scarce(limited) human and non human resource among its alternative use in order to satisfy unlimited human needs and wants.”


Seeks to address:


Limited resource —> 

  products(goods &services)-----> 

unlimited human needs and wants


(needs and wants may be interchangeable depending on the person) 

FACTORS OF PRODUCTION:directly used in order to produce:



Land-rent

labor- salary/wage

Capital-intent 

Entrepreneur-profit  

Foreign exchange 

E.g Food products -----> 

Needs:


Food

Shelter

Çlothing

Water

Education

healthcare

….

Wants


Jewelry

Gadgets

Vehicles

… 

Humanities and Advertisement 


Systems of allocation:

(ECONOMIC SYSTEMS)

COMMAND (Iron Hand) that divides how resources are distributed 

MARKET(invisible hand) nobody dictates but the market forces, resources are distributed based on demand supply, price and, quantity 


Market forces based on 

- Law of Demand

- Law of Supply

- Price Levels and Quanitity

TRADITION (Dead Mans Hand) determines how resources are distributed; based on the past on how resources are allocated  

DEMAND(think that you are consumer/buyer)

Law of Demand

- more on the natural law

- “as the price of the commodity increases or decreases, quantity demanded(QD) decreases or increases,( provided ) all other things remain constant.”

Qd (Quantity Demand)= -P (Price) + k (Other Constant)

Demand moves because price(and other constants)

Qd= -P + k.. 

  • If price increases quantity demanded decreases

  • Price and quantity demand has an inverse relationship

- Income Constraint

  • An income constraint refers to the limitation or restriction imposed on an individual or a household's purchasing power due to their available financial resources. It represents the maximum amount of money that a person or a family can allocate toward the purchase of goods and services within a given period.

- Diminishing Marginal Utility 

  • Diminishing marginal utility is a concept in economics that suggests the additional satisfaction or benefit derived from consuming one more unit of a good or service tends to decrease as the quantity consumed increases. In simpler terms, the more of a product or service a person consumes, the less additional satisfaction each additional unit provides.

  • Marginal refers to additional(experiences/products) 

  • Utility refers to the total satisfaction or value that you get from consuming a particular product or service.(unit of satisfaction) 

SUPPLY(think that you are seller) 

Law of Supply

- “as the price of the commodity increase or decrease those quantity supply increase or decrease provided all other things remain constant.”

Qs (Quantity Supplied)=P (Price) +k (Other Constant)

Qs= P + k

  • If price increases quantity demanded increases

  • Price and quantity demand has an direct relationship

- Profit Motive

  • The profit motive is a fundamental concept in economics and business that refers to the driving force behind individuals and firms seeking financial gain or profit as a primary incentive for their economic activities. It is the desire to earn a positive return on investments, efforts, and entrepreneurial endeavors.


- Diminishing Marginal Returns

  • Diminishing marginal returns is an economic principle that describes the reduction in the incremental output or benefit obtained from an additional unit of input, while keeping other inputs constant. In simpler terms, as one input is increased, the additional output gained from each additional unit of that input will eventually decrease.