Professional Documents
Culture Documents
L1
Presented by
Dr Khin Khin Oo
Professor
Department of Economics
Meiktila University of Economics
The standard definition
Economics is the social science which examines
how people choose to use limited or scarce
resources in attempting to satisfy their unlimited
want .
Unlimited Limited
Wants Resources
Scarcity
Choice
Economics
Microeconomics Macroeconomics
Economics
Choices
Scarcity
People are rational when they behave
as if they were comparing costs and
benefits
Everything has alternative uses
Tradeoffs
Opportunity cost
Scarcity and Choice
Scarcity means that people want more than is
available. Scarcity limits us both as individuals and as a
society. As individuals, limited income (and time and
ability) keep us from doing and having all that we
might like.
Scarcity for society
As a society, limited resources (such as manpower,
machinery, and natural resources) fix a maximum on
the amount of goods and services that can be
produced
Scarcity requires choice
People must choose which of their desires they will
satisfy and which they will leave unsatisfied.
When we, either as individuals or as a society, choose
more of something, scarcity forces us to take less of
something else.
Branches of Economics
Economics is usually divided into two main
branches
Principles of Microeconomics
&
Principle of Macroeconomics
Microeconomics
which examines the economic behaviour of individual
actors such as businesses, households, and individuals,
with a view to understand decision making in the face
of scarcity and the allocation consequences of these
decisions .
Macroeconomics
Which examines an economy as a whole with a view to
understanding the interaction between economic
aggregates such as national income, employment and
inflation
Note that general equilibrium theory combines
concepts of a macro-economic view of the economy,
but does so from a strictly constructed microeconomic
viewpoint.
Other subdisciplines includes
International economics, labour economics, welfare
economics, neuroeconomics, information economics,
resource economics, environmental economics,
managerial economics, financial economics, urban
economics, development economics, and economic
geography.
New definition
Economics is sometimes called the study of scarcity
because economic activity would not exist if scarcity
did not force people to make choices.
1
INTRODUCTION
Economy. . .
. . . The word economy comes from a Greek word for
“one who manages a household.”
TEN PRINCIPLES OF ECONOMICS
A household and an economy
face many decisions:
Who will work?
What goods and how many of them should be
produced?
What resources should be used in production?
At what price should the goods be sold?
TEN PRINCIPLES OF ECONOMICS
Society and Scarce Resources:
The management of society’s resources is important
because resources are scarce.
Scarcity. . . means that society has limited resources and
therefore cannot produce all the goods and services
people wish to have.
TEN PRINCIPLES OF ECONOMICS
Economics is the study of how society manages its scarce
resources.
TEN PRINCIPLES OF ECONOMICS
How people make decisions.
People face tradeoffs.
The cost of something is what you give up to get it.
Rational people think at the margin.
People respond to incentives.
TEN PRINCIPLES OF ECONOMICS
How people interact with each other.
Trade can make everyone better off.
Markets are usually a good way to organize economic
activity.
Governments can sometimes improve economic
outcomes.
TEN PRINCIPLES OF ECONOMICS
The forces and trends that affect how the economy as
a whole works.
The standard of living depends on a country’s
production.
Prices rise when the government prints too much
money.
Society faces a short-run tradeoff between inflation and
unemployment.
Principle #1: People Face Tradeoffs.
Efficiency v. Equity
Efficiency means society gets the most that it can from
its scarce resources.
Equity means the benefits of those resources are
distributed fairly among the members of society.
Principle #2: The Cost of Something Is What
You Give Up to Get It.
Decisions require comparing costs and benefits of
alternatives.
Whether to go to college or to work?
Whether to study or go out on a date?
Whether to go to class or sleep in?