The concave (to the origin) shape of the curve stems from an assumption that resources are not perfectly
occupationally mobile.
Points outside the P.P frontier (to the North East) are unattainable under the present technical know-how.
Points inside it say, H, would be inefficient since resources...
ECONOMICS INDEX
Lesson – 1 Introduction to Economics
Lesson – 2 Elementary Theories of Demand and Supply and the Theory
of Consumer Behaviour
Comprehensive Assignment 1
Lesson – 3 The Theory of Production
Lesson – 4 National Income Analysis
Comprehensive Assignment 2
Lesson – 5 Money and Banking
Lesson – 6 Labour and Unemployment
Comprehensive Assignment 3
Lesson – 7 Public Finance
Lesson – 8 International Trade and Finance
Comprehensive Assignment 4
Lesson – 9 KASNEB syllabus. Model answers to reinforcing questions.
Selected past papers with model answers. Work through model answers ensuring they are understood. On
completion submit final assignment to Strathmore University.
FINAL ASSIGNMENT
Mock Examination Paper
,Lesson One 1
LESSON ONE
INTRODUCTION TO ECONOMICS
LEARNING OBJECTIVES
At the end of the lesson the student should be able to:
Distinguish between economics and other social sciences like sociology, ethics etc
Understand the meaning of scarcity as used in economics
See how scarcity is at the centre of all economic problems
Enumerate economic goals and problems
Know that it is difficult to arrive at "Pure" economic decisions since the economic problems are
closely bound up with political, sociological and other problems
Understand the reasons for specialization and Exchange
CONTENTS
Meaning and scope of Economics
The Methodology of economics and its basic concepts
Economic description and analysis
Economic goals and problems
Scarcity, choice, opportunity cost and production possibility frontiers and curves Economic systems
Specialization and Exchange
, Lesson One 2
ASSIGNED READINGS:
MODERN ECONOMICS
1. THE MEANING AND SCOPE OF ECONOMICS
(i) What is Economics?
The modern word "Economics" has its origin in the Greek word "Oikonomos" meaning
a steward. The two parts of this word "Oikos", a house and "nomos", a manager sum up
what economics is all about. How do we manage our house, what account of stewardship can we render
to our families, to the nation, to all our descendants?
There is an economic aspect to almost any topic we care to mention – education, employment, housing,
transport, defence etc. Economics is a comprehensive theory of how the society works. But as such, it
is difficult to define. The great classical economist Alfred Marshal defined economics as the "Study of
man in the ordinarybusiness of life".
This, however, is rather too vague a definition. This is because any definition should take account of
the guiding idea in economics which is scarcity. The great American economist Paul Samuelson thus
defined it as: "The study of how people and societychoose to employ scarce resources that could have
alternative uses in order to produce various commodities and to distribute them for consumption, now
or in future amongst various persons and groups in society.
Virtually everything is scarce; not just diamonds and oil but also bread and water. The word scarcity
as used in economics means that; All resources are scarce in the sensethat there are not enough to fill
everyone's wants to the point of satiety.
We therefore have limited resources, both in rich countries and in poor countries. The economist‟s job is
to evaluate the choices that exist for the use of these resources.
Thus we have another characteristic of economics; it is concerned with choice.
Another aspect of the problem is people themselves; they do not just want more food or more clothing
they want particular types of food, specific items of clothing and so on. By want we mean;
"A materialistic desire for an activity or an item. Human wants are infinite.
We have now assembled the three vital ingredients in our definition, People (human wants), Scarcity
and choice. Thus for our purpose we could define economics as:
"The social science which is concerned with the allocation of scarce resources to provide goods and
services which meet the needs and wants of the consumers"
(ii) The Scope of Economics?
The study of economics begins with understanding of human “wants”. Scarcity forces us to economise.
We weigh up the various alternatives and select that particular assortment of goods which yields the
highest return from our limited resources. Modern economists use this idea to define the scope of their
studies.
2
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