INTRODUCTION TO ECONOMICS
AND
SUSTAINABLE DEVELOPMENT
What is the mark break-down?
This course is out of 200 marks.
These marks are divided as follows:
1- 60 marks for attendance and classwork
• projects, quizzes, assignments,….etc
2. 60 marks are for the mid-term exam
3. 80 marks are for the final exam
Where can we find the course material?
1. PowerPoint presentations, which will be uploaded on google
classroom
2. You will be assigned to read about some topics
Classroom Code:
dtmsbyx
What are the course objectives?
1. Introducing the main concepts of economics, development, and
sustainability.
2. Raising students’ awareness about the socioeconomic and
environmental challenges that are currently emerging.
3. Preparing students to be responsible citizens and address
developmental issues
4. Enabling students to think, reflect, plan, and act for building
changes toward a sustainable future.
Lecture One: Introduction to Economics
Important Questions
We need to answer the following questions:
1. What is the Economic Problem?
(limited recourses – unlimited wants and needs)
(Scarcity – choices – incentives – opportunity cost )
2. What is Economics?
3. Why we study Economics?
Economic Resources (Factors of Production) and their Returns:
Labor Wages
Capital Interest
Land Rent
Entrepreneur Profit
Economic Produce Satisfy
Resources Quantity of individuals
(Factors of Goods and wants and
Production) services needs
First: The Economic problem
•Resources are •Human wants
limited. are unlimited
(infinite).
First: The Economic problem
Should be used to
Satisfy
Limited Unlimited
Economic Human
Resources Needs/Wants
Economic Produce Satisfy
Resources Quantity of individuals
(Factors of Goods and wants and
Production) services needs
Limited Unlimited
Scarcity Problem
Choice Note: the cost of what we give
“Giving up something in return up is called “opportunity cost”
for another thing”
Second: What is Economics?
Economics is the study of how societies use scarce
resources, to produce valuable goods and services , and
distribute them among different individuals.
Also, Economics can be defined as:
“the social science that studies the choices that individuals,
businesses, governments, and entire societies make when
they deal with scarcity and the incentives that influence
and reconcile those choices.”
A-Scarcity
•Inability to satisfy all our wants .
•How to face scarcity ?
We must choose among the available
alternatives.
B-Choices
• The choices that we make depend on :
- the incentives that we face
- The economic systems
(Free Market economies – Planned economies –
Mixed economies)
• Choices = tradeoff
Three Economic Questions
How do choices end up determining:
- What to produce?
- How to produce?
- For whom goods and services get produced?
1. What, How, and For Whom?
Goods and services are the objects that people value
and produce to satisfy human wants.
i) What to produce?
Means “what goods and services to be produced and in
what quantities?”. Because of scarcity, no society can
produce everything. Therefore, every society has to make
decisions on what goods and services to be produced in
order to satisfy needs and wants.
Ex: Basic goods or luxury products?
ii) How to produce?
• Goods and services are produced by using productive resources
that economists call factors of production.
• What production technique (mix of factors of production) will be
used in producing those goods and services?”.
EX: labor intensive production technique or capital intensive one?
• The choice of the production technique is simply a choice of the
mix of factors of production to be used in the production process.
• Factors of production are: land, labor, capital, and entrepreneur.
iii) For whom to produce?
This question is about “who gets the goods and services
produced?”. So, it is about the distribution of incomes in
the society. Thus, it could be restated as “how are incomes
distributed in the economy?”.
C- Incentive
• Is a reward that encourages or discourages an
action.
Example: In the event that real estate prices rise,
investors seek to build more buildings.
• Incentives influence and reconcile those choices.
Third: Why we study economics?
1. Economics helps people to understand the world
around them.
2. It enables people to understand the behaviour of
households, businesses, markets, and governments, and
therefore better respond to the threats and
opportunities that emerge.
3. It enable people to evaluate alternatives and make
better choices.
4. It develops critical-thinking and problem-solving
skills to make good decisions.
5. It develops analytical skills to examine data to
support good decisions.
6. Economics help people to invest money that they
save - The success of all projects depends on a
realistic and clear feasibility study.
7. Economics can also help individuals to do their
businesses and control their personal
expenditures. (cost and benefit analysis principle)
How much will you pay and how much will you
get in return? “opportunity cost “
8. Economics helps in understanding and interpreting
global situations and development.
Example:
For centuries, countries have attempted to protect their
industries and workers from foreign competition by:
• Taxing and limiting imports.
However, after the 2nd World War many countries signed
the General Agreement on Tariffs and Trade (GATT), which
aims at liberalization of trade from trade barriers, through
reducing tariffs (customs) and elimination of non-tariffs
barriers like quotas (quantitative restrictions)
Further notes on Economic Resources
1. Economic Resources & Free resources
• Economic resources are scarce.
• Free resources such as air and sunlight are abundant and
easily available that they can be obtained without charge.
• The factor that tests whether a resource is an economic
resource or a free resource is the price.
“Economic resources” “Free resources” have a
have a nonzero price. zero price.
Note: Some free resources are limited.
For example: although the earth contains a large
amount of water, it is not a free resource to
homeowners, who must pay a local water authority
for providing and maintaining their water supply.
In a world where all resources were free,
there would be no economic problem, since
all wants could be satisfied.
2. Resources used as the Factors of Production
Resources are the things used to produce goods and
services , which then can be used to satisfy wants.
• How are Goods and Services Produced?
• Factors of production are the resources that
businesses use to produce goods and services.
• They are grouped into five categories:
Land
Knowledge
Capital
Know-how Factors of
production
Entrepreneurship Labour
knowledge-based economy
A) Land
•Consists of an economy’s natural resources,
“gifts of nature”.
•such as minerals, forests, rivers, and
agricultural land.
• Owners of land receive rental income when it
is used to produce goods or services.
Discussion
• What is the area of Egypt?
• What is the utilized area of the total area of Egypt?
• How can the benefit of this space be maximized,
and the various aspects of investment?
• How can you make the best use of this space?
B) Capital
Is human-made resources and consists of tools,
equipment, buildings, and transportation networks,
which used in and/or facilitate the production of
goods and services.
There are two types of capital:
Financial Capital Physical Capital
(i) Financial Capital
•Financial capital is money, credit, and other forms of
funding that build wealth for people and businesses.
•Debit card, Credit card, Loans, Stocks, and Bonds.
•Businesses use financial capital to buy more
equipment, buildings, or materials, which they use to
make goods or provide services.
(ii) Physical Capital
The tools, instruments, machines, buildings, and
other constructions that businesses use to produce
goods and services.
Note:
- Physical capital and financial capital are related.
- Financial capital is needed to purchase physical
capital.
C) Labour
▪ Is the work time and work effort that people devote
to producing goods and services.
▪ The quality of labor depends on human capital,
which is the knowledge and skill that people obtain
from education, on-the-job training, and work
experience
▪ (normal labors for routine jobs, intellectual capital) .
Classification of employees in DELL as a
multinational company
D) Entrepreneurs
Is the human resource that organizes land, labor, and capital. An
entrepreneur organizes, manages, and assumes the risks for an
enterprise.
History's most famous entrepreneurs:
Have these famous entrepreneurs inspired you? Maybe you'll be
next on the list.
Bill Gates
E) Knowledge
Knowledge has become the most important factor of
production and building a knowledge-based
economy. Know-how.
Further notes on Wants and Needs
What is the difference between Wants and Needs?
• Wants: are things that one would like to have but can be
compromised without causing harm.
• The wants or desires of every human vary according to their taste
and financial capabilities.
•
Examples: Some people want a big house, or fancy foods, others desire
branded clothes, trip to a fancy country, going out to see a movie, etc.
• Needs: are essential requirements or necessities which are
essential for living.
• The fulfillment of needs is essential for one’s survival.
• In other words, needs are things that one must have, or cannot survive
without.
Examples: People cannot survive without oxygen, water, food, clothing,
shelter for warmth and protection from harm.