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Lecture notes esc1501 (ECS1501)
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The study field of economics
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The study field ofeconomics Economics is also
about how we make
choices as individuals
and as a society.
What are wants in economics?
o Things we feel might improve our
lives, but we do not really need
these
o things to survive.
1. The economic problem of scarcity
What is the economic problem of scarcity?
o The availability of limited resources.
Also referred to as the scarcity problem, arises because the resources that we have
available to produce goods and services are limited, while our needs and wants for
goods and services are unlimited.
What is a scarce good?
o One for which the choice of one
alternative requires that another
be given up.
2. Unlimited needs and wants and scarce resources.
People use their limited resources to try to satisfy unlimited wants.
Needs - are things we really require surviving, such as basic food, clean water,
shelter and basic clothing.
Wants - are things we feel might improve our lives, but we do not really need these
things to survive. A luxury car, the latest smartphone, we derive satisfaction from
consuming these goods, and some goods give us more satisfaction than others.
, Scarce resources
Resources include everything in the world around us that we can use to produce
goods and services to satisfy our needs and wants.
Classified as three main groups:
I. Natural resources, such as land, water, minerals, animals and plants
II. Human resources, such as entrepreneurs or labour such as economists,
Builders, architects, accountants, lawyers and cleaners
III. Man-made resources such as machines and infrastructure that are available
to use to produce goods – in economics we call these resources capital.
3. Scarce goods and free goods
Scarce good - is one for which the choice of one alternative requires that
another be given up.
Free good - is one for which the choice of one use does not require that we give
up another. One example of a free good is gravity.
4. The three fundamental questions
What is economics the study of?
o How society satisfies its unlimited wants and needs using limited
resources.
What is the first fundamental question that every society needs to answer?
o What goods and services to produce.
This decision requires that we allocate
our scarce resource to the production of
these goods and services.
We also need to answer the question
about what kind of capital goods, that is
the machines and tools we use in the
production of goods and services, we
need to produce.
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