Economics

Introduction to Economics
What is Economics?
Why do we study it?

TASK:
Thinking about choices
Imagine

you
are at this
famous jakarta
shopping mall
You have
$200000.
You have two
hours of time
What will you
do?

Scarcity and Choice

This is the reason for the existence of this subject. In reality most
resources are scarce. Similarly individuals and nations have
unlimited wants.

Scarce Resources
There

are only a limited number of

resources such as workers, machines,
factories, raw materials etc. Yet there are
a number of different ways in which they
could be used.
What are the different ways we

could use water?

Scarcity and choice

people

only have a limited amount of

money. Yet they have lots of needs and
wants to satisfy.

Scarcity and choice

Also

the Government has a limited

amount of money 440 billion !!!!.
However, it is unable to satisfy all its
wants.

 Economics

is the study of how people

seek to satisfy their needs and wants by
making choices.
Why, oh why, must we make these
difficult choices, you ask??...

 ...because

of the idea economists call

scarcity
Scarcity means that we have limited
quantities of resources to meet our
unlimited wants.
Economics is about solving the problem
of scarcity.

 ...because

of the idea economists call

scarcity
Scarcity means that we have limited
quantities of resources to meet our
unlimited wants.
Economics is about solving the problem
of scarcity.

 Scarcity

Shortage

Shortage

when producers will not or

cannot offer goods or services at the
current prices (more on this later)
Temporary

Scarcity

or long term

always exists b/c our needs

and wants are always greater than our
resources

The Basic Economic Problem

THE

BASIC ECONOMIC PROBLEM

the problem arises because resources
are scarce, but human wants are
unlimited.
Write a list of things the government
provides
Which are more important than others?
What is the difference between a need
and a want?

Primary idea: We cant have everything

we need and want!

Needs: necessary for survival

Air,

food, shelter

Wants: item we desire but do not NEED

to survive
If we cannot have everything, how do we
make decisions???

Scarcity
Are

the following items wants or needs

for you?
Food
TV
Healthcare
Education
Military
Drink
PS3
Shelter
Car
Clothing

Scarcity
Can

you think of 5 items that are very

scarce?
What tends to be the price level of these
items?
Is there anything that is not at all
scarce?
Try to list at least 3
What is the price level of each?

3 Basic questions
So

economics is fundamentally about

allocating scarce resources.
What do you think the 3 basic questions that
economists try to answer would be?
Fundamental Questions of Economics Scarcity requires all societies to answer the
following questions:
What is to be produced?
How is to be produced?
For whom will it be produced?

Economic Activity
Consider

your own household economy

What is produced by your household?

(eg: cooking, cleaning, accommodation, transport)

How

is production organised?

(eg: who cooks, who cleans, what equipment is needed, when

is it done?)

For

whom does production take place?

Do you think your household production should
be organised in a different way? Justify your
answer.

3 Basic Questions
How

do different countries try to answer

these questions?
With the country you have been given,
write a note stating how you think they
answer each question
Compare your answers with your
classmates or seatmates.
Do you agree?

Who should provide for the wants

and needs in the economy?
Who provides these goods and services?
Should it be provided by the private or
public sector?
Rank them in order of importance
What other services are essential, do you
think?

How do we choose what should be

produce?
We

can use a Production Possibilities

Curve, or Frontier
This shows the opportunity cost of
producing one thing over another
Can we produce more of every item?
Are we always being as efficient as we
can be?

Quiz
What

is the average
price of this
product?
$0.000537 per litre
How much is this
product?
$1.00 per litre
Why the difference?

Quiz
How

much does the

product cost?
the painting was assessed,
for insurance purposes, as
valued at $100 million
$100 million in 1962 is
approximately $700 million
in 2009 when adjusted for
inflation
Why?

END OF CLASS Good Day