Introduction to Economics
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Transcript of Introduction to Economics
Why do we need to study economics?
“Economics studies how people make decisions to satisfy needs and wants”
NeedsNeeds
Unlimited needs
Maslow's hierarchy of needs
Maslow uses the following terms: Physiological, Safety, Belongingness and Love, Esteem, and Self-Actualization. There is a need to describe the pattern of the human motivation.
Limited resources
Scarcity of resources and need to choose
Scarcity happens when there are limited quantities of resources to meet unlimited need or desires.
ECONOMICS ECONOMICS
Unlimited needs Scarcity of resources
Scarcity
Opportunity cost
Choice
generating
implies
arises from the conflict between
Which materializes in
What will be produced?
How will it be produced?
For whom will it be produced?
Economic Systems
Market Economy
Command System
Mixed Economy
how a country answers these questions depends on the type of economic system they have
Opportunity cost of our decisions
Opportunity cost is the value of the best available option for someone who has chosen from among several mutually exclusive options.
ECONOMICS ECONOMICS
Unlimited needs Scarcity of resources
Scarcity
Opportunity cost
Choice
generating
implies
arises from the conflict between
Which materializes in
What will be produced?
How will it be produced?
For whom will it be produced?
Economic Systems
Market Economy
Command System
Mixed Economy
how a country answers these questions depends on the type of economic system they have.
Economic agents Economic agents
are the protagonists of the economy, and therefore they have to choose.
Firms Households
Productive factors
Labor
Land
are interrelated by
Capital
Incomes
Costs
For performing the
Economic agents
Circular flow of income
Govermment
Production
need
results in
Circular flow of income