Economics-Topic 1; Introduction to Economics

ECONOMICS – TOPIC 1: INTRODUCTION

1. Meaning of Economics

Economics is the study of how individuals, businesses and governments use limited resources to satisfy their unlimited wants.

2. Human wants

Human wants are things people desire to satisfy their needs and improve their standard of living. Examples: food, clothing, shelter, education and mobile phones.

3. Resources

Resources are things used to produce goods and services.

4. Basic economic problem

The basic economic problem is scarcity. Scarcity occurs because human wants are unlimited while resources are limited.

5. Three basic economic questions

What to produce? How to produce? For whom to produce?

6. Opportunity cost

Opportunity cost is the next best alternative forgone when a choice is made. Example: If you have GH₵20 and buy a book instead of food, the food you gave up is your opportunity cost.

7. Factors of production

Land – natural resources. Labour – human effort. Capital – man-made resources used in production. Entrepreneurship – organising other factors and taking business risks.

8. Goods and services

Goods are physical items that satisfy human wants, such as books and clothes. Services are activities performed to satisfy wants, such as teaching and healthcare.

9. Scarcity and choice

   • Scarcity refers to the basic economic problem that arises because resources are limited while human wants are infinite. This leads to the necessity of making choices about how to allocate resources effectively.