Transcript Demand - 瑞玛教育国际课程辅导中心

Unit One
INTRODUCTION TO
ECONOMICS
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Introduction to Economics
The Economics is the study of how scarce resources
are or should be allocated.
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Introduction to Economics
The problem of scarcity
Scarcity means that society has limited resources
and therefore cannot produce all the goods and
services people wish to have.
Scare resources
The management of society’s resources is important
because resources are scarce.
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Introduction to Economics
Unlimited wants
Human wants are unlimited.
This can include more
food, a bigger house a
longer holiday, a cleaner
environment.
No one would choose to live at the level of basic human
needs if they could enjoy a higher standard of living.
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The problem of scarcity is present in some
form or another
A. in all societies.
B. in the industrialized countries only.
C. only in market systems.
D. only in command economies.
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The basic Economic problem
The Economic problem
Scarce resources in relation to unlimited wants.
Since there are only a limit amount of resources
available to produce the unlimited amount of goods and
services we desire.
 factors of production (have limits) /society’s demands
= wants (no limits)
land
labor
capital
Factors of production
Enterprise
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What Is Economics?
The Economics study of how societies use scarce
resources to produce valuable commodities to satisfy
our wants.
It also study how to allocate their scarce resources in
the most efficient way.
Because our resources are limited, we cannot
produce an unlimited number of different goods
and service.
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Exercise
The major economic problem is that of
A. allocating scarce resources in such a manner that
society's unlimited needs or wants are satisfied as
well as possible
B. guaranteeing that production occurs in the most
efficient manner
C. comparing the success of command versus market
economies
D. guaranteeing a minimum level of income for every
citizen
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Three Economic Questions
1. What to produced?
What goods and services are produced?
2. How to produce?
What production methods are used?
3. For whom to produce?
Who is to receive goods and services?
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Three Economic Questions
1. What to produced?
We need to decide what to produce and in what quantities.
Make decision
Improve our standard of living
Food, clothing and vehicles

Improve our defences
Military hardware

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Three Economic Questions
2. How to produce?
We need to consider how we can get the maximum use
out of the resources available to us.
What is the best use of our scarce
resources of land labour and capital?
The full impact on the
environment
Any potential longterm health risks.
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Three Economic Questions
3. For whom to produce?
We need to concern how many of each person’s wants
are to be satisfied.
What is the best method of distributing products to
ensure the highest level of wants and needs are met?
Who is to receive goods and services
Who will get expensive
hospital treatment
Why is there so much
poverty?
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What Is Economics?
 Economics is concerned with trying to explain the
causes of / and solutions to many of today’s important
issues (e.g. unemployment, growth & living standards,
distribution of income and wealth)
 Economics is divided into two main branches:
1. Microeconomics (small)
Adam Smith---- The Wealth of Nations.
2. Macroeconomics (large)
John Maynard Keynes ----- General Theory of
Employment, Interest and Money.
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What Is Microeconomics?
Microeconomics is the study of the behaviour and
decisions of individuals and business in markets across
the economy.
What Is Microeconomics Analysis?
 the study which investigates how scare factors of
production are allocated between alternative ends
 the study which seeks to identify the strategic
determinants of an optimally efficient use of factors
of production
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Microeconomics
Microeconomics study the decisions and behavior of
 Consumers
 Producers
 Individual markets
It is concerned with the demand and supply of particular
goods, services and resources such as cars, butter, computer.
e.g. Demands and supply, Elasticity ,Cost of
production & Revenue and profit , Market
Structure, Market Failure, etc.
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Microeconomics best describes the study of
A. the growth rate of GNP.
B. behaviour of individual economic agents.
C. effects of aggregate inflation.
D. level of national unemployment.
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What Is Macroeconomics?
 it is concerned with the economy as a whole
 the study of aggregate economic activity
 Aggregate Demand – the total amount of spending in
the economy
 Aggregate Supply – the total amount of output in the
economy
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What Is Macroeconomics Analysis?
 the study which investigates how the economy (as a
whole) works
 Macroeconomics seeks to identify strategic
determinants

National income(GDP)

Economic growth

Unemployment

Inflation

International trade
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Microeconomics & Macroeconomics

Microeconomics
concerned with
behaviour and
decisions of
individuals and
business in
markets.
Ingredients
How to divide?

Macroeconomics
concerned with
the economy as a
whole
The size and
shape
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Which of the following are macroeconomic issues,
which are microeconomic ones





a) The rate of inflation
b) Why the price of cotton fluctuates more than
that of cars.
c) The rate of economic growth this year
compared with last year.
d) The average wage rate paid to automotive
industry
e) The total amount spent by UK consumers on
service
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Scarcity, Choice, and Opportunity Cost


Scarcity
Choice
Trade-offs



Opportunity Cost
Economic Goods
Free Goods
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2. Scarcity, Choice & The Opportunity Cost
Scarcity ---- economic agents, such as individuals,
firms, governments and international agencies, can only
obtain a limited amount of resources.
A family
cannot have
everything it
wants in fixed
budget.
A firm want to
build a new
factory but not
have the
resources to do.
A government
wish to build
new hospitals
but not have the
finance to do.
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2. Scarcity, Choice & The Opportunity Cost
Scarcity means that society has limited resources and
therefore cannot produce all the goods and services
people wish to have.
The resources are SCARCE.
There are limited amounts of
 land
water
oil
Food
Housing
other resources.
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2. Scarcity, Choice & The Opportunity Cost

Trade-offs
 Making a choice made normally involves a tradeoff - In a world of scarcity, choosing one thing
means giving up something else in exchange.
“There is no such thing as a
free lunch!”
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Scarcity, Choice, and Opportunity Cost
People face tradeoffs.
To get one thing, we usually have to give up
another thing.
 Leisure time v. work
 Guns v. butter
 Food v. clothing
Making decisions requires trading
off one goal against another.
Scarcity, Choice, and Opportunity Cost

Making choose.
 When
you use a resource for one good, you
can’t use that resource for something else.
Hotel
Building school
Business office
 When
you spend money on one good, you can’t
use that money for anything else.
Water
Ice cream
Newspaper
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Scarcity, Choice, and Opportunity Cost

Making choose
 Housing:
Choices about whether to rent or buy a
home
 Working: Choosing between full-time or part-time
work, or to take a course in higher education
lasting three years
 Transport and travel: The choice between using
Euro-Tunnel, a speedy low-cost ferry or an airline
when travelling to Western Europe
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Scarcity, Choice & The Opportunity Cost
 Given limited resources and unlimited wants
we have to choose which wants to satisfy.
 For example, suppose you were given a $15. you
could either buy a new compact disc which costs $15
or two book for $7.5 each.
 What is the opportunity cost of the CD?
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Scarcity, Choice, and Opportunity Cost
The opportunity cost of a
decision is the value of the
good or service forgone.
Opportunity cost of going to college
If the total costs of tuition, books, and travel to be
￥18000. A full time job for 18-year-old high
school graduate would on average pay around
￥15000 in 2008. Calculate the opportunity cost of
going to college.
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Scarcity, Choice, and Opportunity Cost
LA Laker basketball
star Kobe Bryant
chose to skip college
and go straight to the
NBA from high school
when offered a $10
million contract.
Economic goods and free goods

Economic goods ---- these are goods which
have a cost in terms of the real resources used.
 Most
goods are economic goods. Economic
goods are
 Scarce (not unlimited)
 Produced with resources
 Have an opportunity cost
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Economic goods and free goods

Example for economic goods
 Insurance services are
 Scarce (not unlimited)
 Produced with workers, machines, office
equipment and office
 The resources used for insurance could
have been used to produce banking
services
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Economic goods and free goods

Free goods, which have no price attach to them
and which require no factors of production for
their enjoyment by consumers.
 Only
a few goods are free goods. Free goods are
 Not
scarce (unlimited)
 Available without using resources to produce them
 Do not have an opportunity cost
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Economic goods and free goods

Example for free goods
 Sunlight
 It not scarce
• If we use it, there is still the same
amount as before
 We do not use resources to produce it
 It does not have an opportunity cost
• We do not need to give up anything to
have sunlight
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The economic problem in society
Demands is unlimited
Wants can be satisfied by
Free goods
(air, sunshine, rain water ,etc.)
Production factors (scarce resource)
(Land, Labor, Capital, Enterprise)
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An important theme in economics is that
A. some types of economic systems rely on
government to answer the fundamental questions.
B. there are alternative uses for society's scarce
resources.
C. market systems are better than command
economies.
D. economic science is not dismal.
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An important idea in the definition of economics
is that the subject teaches an individual how to
operate efficiently and make money.
 False
 True
Because every society faces essentially unlimited
human wants and limited productive resources ,
every society must choose among different
production and distribution alternatives.
 False
 True
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