01 Economics and Its Importance
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ECONOMICS AND ITS
IMPORTANCESummer 2016
10-May-2016
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Economics is a social science concwith the efcient allocaand utilization o scarce
resources or the satiso he society’s unlimiteand needs.
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Economists • how people make decisions; how
work, what they purchase, how m
save out o their income and how
their savings
• how people interact with one ano
• analyze orces and trends that a
whole country
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DIVISIONS
OF ECONOMICS
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Micro- economics
branch o economics that ethe unctioning o the indivindustries and the behavio
individual decisionmakingi.e. business "rms and hou
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Macro- economics
branch o economics thatexamines the economic bo aggregate economic v
i.e. income, output, emplinvestment, and general prices
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BRANCHES
OF ECONOMICS
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Positive Economics
• seeks to understand the
behavior and the opera
the economic system w
making #udgments abou
whether the outcomes a
or bad
• describes what exists a
it works $ypes%
1. Descriptive Economics is theand presentation o data that dphenomena and acts.
2. Economic Theory is a statem
or sets o related statements a
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Normative Economics
• looks at the outcomes o ec
behavior and asks i they ar
bad, whether they can be m
better• involves #udgments and pre
or causes o action
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METHODOLOGY
OF ECONOMICS
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EconomicTheory
• attempts at "nding explanations
observed economic phenomena
establish cause and eect relatio
! why a person makes certain econ
decisions! why a particular outcome is reali
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Economic Model
• ormal statement o an economic
which is usually a mathematical
o a presumed relationship betwe
more variables
• &ommonly expressed in words, ge'uations
! (aw o )emand and *upply
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FOUNDATIONS
OF ECONOMICS
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UnlimitedWants
• the desire o consumers t
satisaction rom the vari
goods and services they
! necessities to luxuries• individuals and institution
enumerable un"lled want
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Scarce Resources
• +ll natural, human, and
manuactured resource
into production and serv
! actory, e'uipment, tomachinery, transportatcommunication, acilitiland, and mineral resou
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CATEGORIES of
ECONOMIC RESOURCES
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Land(arable land, forests,
mineral and oil deposits,water resources, etc.)
• -ncludes all natural reso
i.e., all gits o nature us
the production process
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Labor(teachers, engineers,
factory workers, physicians, professional athletes, etc.)
• eer to all the physical and
talents o individuals availab
usable in producing goods an
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Capital(tools, machinery, equipment, etc.)
• -ncludes all produced go
used again to produce
consumer goods and se
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Entrepreneur • +n individual who comb
land, capital, and labor
produce goods or servic
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QUIZ
TOMORROW12May2016
--end of presentati