What is economics?
“Economics is the social science that describes the factors
that determine the production, distribution and consumption
of goods and services.”
Economics is a social science that studies goods and
services. On a broader note it involves;
• Wants and Needs of humans;
• Availability and allocation of resources;
• Production and distribution; And
• Consumption.
Modern Economics incorporates almost every interact
around us. We are making economic decisions throughout
our day consciously or subconsciously.
SCARCITY
Scarcity means resources to produce goods and services
are available in limited quantity and may eventually run out.
E.g. Oil, Drinking water, Clean Air, Coal, Iron Ore, Gold,
etc. Scarce resources have alternative uses. E.g. A spare
land can be used for multiple purpose.
NEEDS and WANTS
Needs are basic survival things such as: food, clothing,
shelter, transportation, medicine, etc. It’s required by the
rich and the poor. On the other hand, Wants are unlimited.
It’s having more than basic need such as Hi-Tech things,
expensive clothing, large houses, etc.
1. The nature of the economic
problem
RESOURCES
A resource is anything which can be used to make
Goods and Services. There are multiple resources with
multiple uses. These are renewable and non-renewable
resources: Renewable resources are things which can
be used again and again, such as solar energy, land,
etc. Non-renewable resources are things which deplete
and finishes, such as coal, oil, etc.
Types of goods
• Economic goods:A good or service that has a degree of
scarcity and therefore an opportunity cost.
• Free goods: A good or service that is not scarce and is
available in abundance. For example, the air we breathe.
2. Factors of production
• Consumers are people or firms who need and want
goods and services
• Resources or factors of production are used to make
goods and services
People are living longer because healthcare, education,
housing, sanitation and nutrition have improved. This, in
turn, is because of increases in the quantity and quality of
factors of production. Factors of production is another term
for economic resources. Most economists identify four
factors of production:
• land
• labour
• capital
• enterprise.
Some economists, however, claim that there are really
only three factors of production and that enterprise is a
special form of labour.
Mobility of the factors of production
Quantity and quality of the factors of production
3. Opportunity cost
When we decide to do one thing, we are deciding not to
do something else. To ensure that we make the right
decisions, it is important that we consider the alternatives,
particularly the best alternative. Opportunity cost is the cost
of a decision in terms of the best alternative given up to
achieve it, for example there are a variety of things you
could do tomorrow between 5 pm and 6 pm.
Influence of opportunity cost on decision making