This document provides in depth notes from Year 1 of your economics studies. It covers all aspects of micro and macro economics and helps you prepare for exams!
-Economics studies a choices people take under the conditions of scarcity and uncertainty.
-Since economics is social science we can never be sure in the way in which people and businesses
will respond to changing circumstances around them.
-Traditional economic theory has assumed the customer seek to maximize their own satisfaction and
that businesses into maximize profit.
-But new theories including behavioral economics suggest alternatives and focus on the social aspect
of our behavior in day-to-day life.
Cetirus Paribus: Other things being equal, constant or the same
Investement/income
Income Imports
C= a+ bY AD= C+ I+ G + (x-m)
Consumption
Consumption Exports
Positive statements
-Or objective statement that can be tested, amended or
rejected by referring to available evidence
-A full statement is also a positive one!
Normative statements
-Are subjective statements
-they carry value judgments about what ought to be
**usually when should, ought are in the sentence they are
they are normative
, Chapter 2: The economic problem
The fundamental economic problem:
Economic output/
goods and services
Inputs Production process
Factors of production Remember! Capital is not
money. Anything man-made
1. Land 1. raw materials that can be used in the
2. Labour 2. Workers production process
3. Enterprise/ entrepreneurship 3. Entrepreneurs
4. Capital 4. Machines
Needs VS Wants The fundamental
economic problem
Needs are central for survival
Wants are for your happiness and satisfaction
Scarcity
The needs and wants of a A? Or B?
society are unlimited but the Choice
resources are limited.
The cost of the next best
alternative sacrificed
The economic system attempt to solve the economic problem
What?
How?
For whom?
Labor intensive Capital intensive
A lot of workers A lot of capital
Tourism Car manufactoring
, Economic systems
A Free market economy A command or planned economy
Mixed economy
Public sector, government only
Private sector, all goods and services e.g. North Korea Cuba or the Soviet
produced or allocated by free markets union
ex. of the USA or Singapore Private + public sector
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