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MANCOSA Summary of Economics 1A
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  • Course
  • ECONOMICS (ECS)
  • Institution
  • University Of South Africa (Unisa)

This document provides a clear explanation of the aspects of economics from the PPC (opportunity costs and scarcity) to demand and supply and circular flow to price elasticity and perfect competition. It also provides questions to test your knowledge.

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Document information

  • May 18, 2023
  • 113
  • 2022/2023
  • Summary

Subjects

  • ppc curve
  • demand and supply
  • elasticity
  • government intervention
  • market equilibrium
  • circular flow
  • price elasticity of demand
  • perfect competition and market structure

Written for

  • University of South Africa (Unisa)
  • ECONOMICS (ECS)
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CHAPTER 1: ECONOMICS AND THE PPC CURVE
Definitions:
 Study of how scares productive resources is used to satisfy human wants
 Study of how individuals & Society choose to use scares resources that nature and
previous generations have provided
 Study of how scares resources are allocated among various uses
 Study of scares resources to satisfy unlimited human wants
 Study of how society manages scares resources

What is economics
about?  Deals with the choices people have to make
 Science of household management and such;
o Concerned with business of life
 Studies decisions of Business, Government and other decision makers in society
o Example: Should Toyota expand production of vehicles?
 Business and Government must also make choices everyday
Assumptions in
Economics  Economics is a social science
 What is Science?
o In order to meet scientific property of being TRUE in all instances, we make
assumptions
Example:

o If Price of coke increases, quantity demanded in decrease (ceteris paribus)

MICROECONOMICS MACROECONOMICS
* Focus on Individual Participation in Economy *Concerned with economy as a whole

 Producers  Stability of general price levels (Inflation)
 Employers  Maintenance of full employment
 Workers  Economic Growth
 Firms  Distribution of Income
 Government Spending
 Nation’s money supply
EXAMPLES
MICROECONOMICS MACROECONOMICS
 Price of single Product  Consumer price index (Group of products)
 Change in price of product, e.g. Mangoes  Inflation, e.g. Increase of general level of prices
 Production of wheat  Total outputs of all goods & services in economy
 Market on individual goods, e.g. maize  Total demand for all goods & services in economy
 An Individuals decision to export its products  Total Exports of goods & services to other countries
 A Firms decision to import from abroad  Total imports of goods & services from other
countries
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 Scarcity (Limited Re
Key Economic  sources)
Terms (Factors)  Choice
 Opportunity Costs


Unlimited wants:
o Cannot be met with Limited Resources
o Choices need to be made, as resources are limited
Scarcity
Resources
o Used in the production of goods & Services
o Resources are limited
Wants
 Human Desires, can live without these, e.g. fancy car
 Wants is unlimited we all want everything
Example:
You have R100 = Resource
You want to by for much more than R100 = Wants
Wants, Needs and
You have to choose between the things you want because you only have R100
Demands
Needs
 Essential for survival, e.g. Food, water, clothing
Demands
 For there to be a demand for goods & services, those who wants to buy them,
must have the means and the purchasing power.
* The Opportunity cost of choice is:
 Value of the best alternative that could have been chosen but was not chosen
 The value of the best forgone opportunity
 1 of the post important concepts in Economics
 Captures the essence of the problems of scarcity and choice
 Economist do not only consider monetary costs
 Economist also consider “implicit” cost – asking how scares resources could
Opportunity Cost have been used In alternative way
(Make Choices)
*Implicit Cost: Cost of self-supplied Factors of Products
**The value of the best alternative sacrificed when a choice is made**
** Economics uses Opportunity costs to measure the cost incurred in choices - With
Every choice comes Opportunity costs
Example:
Jack has to choose between going to the movies or study
The Opportunity cost of studying is to visit the movies that he forgo


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RESOURCES  Because Resources are scares, there is always a cost involved
(ALSO CALLED  Resources are limited, therefore goods & services to satisfy our wants are also
FACTORS OF limited
PRODUCTION  Individuals & Society: Confronted with Unlimited wants and limited resources
 Time is a limited resource
 Scarcity – affects everyone, therefore NOT poverty

Economic Problem
Society must make difficult choices between different alternatives


Factors of  Natural Resources (Land)
Production  Labour
 Capital
 Entrepreneurship


FACTORS OF PRODUCTION




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PRODUCTION
POSIBILITIES CURVE MOVEMENT ALONG PPC CURVE
(PPC) – or
PRODUCTION The PPC Illustrates
POSSIBILITIES  Scarcity - Resources
FRONTIER (PPF)  Choice – how much to produce of each product
 Opportunity cost – With resources available decide how much of one product you
can produce and forgo, in order to produce another product
 Potential Output: Maximum attainable combinations of 2 goods or services
 Shows: When resources are fully utilized



Example:

PRODUCTION POSSIBILITY SCHEDULE
Possibility Fish (baskets per day) Potatoes (kg per day)
A 0 100
B 1 90
C 2 80
D 3 70
E 4 40
F 5 0

Opportunity cost: Example
To produce 3 baskets of fish,
H: Resources not fully utilised –
forgo 30 kg of potatoes
should produce at “D” with
available resources




G: Unattainable with available
resources




Outward Bulging:
Increasing Opportunity Cost




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