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Summary of Notes.
- Course
- What is Economics all about?
- Institution
- North-West University (NWU)
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2022BASIC MICRO-ECONOMICS
CHAPTER 1: WHAT IS
ECONOMICS ALL ABOUT?
SUMMARY OF NOTES.
, WHAT IS ECONOMICS ALL ABOUT
1.1 ECONOMICS 1.2.2 OPPORTUNITY COST
❖ Economics is the study of how individuals, ❖ Opportunity cost is the cost of the alternative
businesses, governments and other that has been chosen and can be measured in
organizations within our society choose to use terms of the alternatives sacrificed.
scarce resources to satisfy their unlimited
1.2.3 OPPORTUNITY COST OF CHOICE
needs and wants.
❖ Economics is applying scarce resources in order ❖ Is the value of the best forgone opportunity.
to satisfy our unlimited wants. ❖ Is the value to the decision maker.
❖ Economics is derived from the Greek words
1.3 ILLUSTRATING SCARCITY, CHOICE AND
“oikos” meaning house and “nemein” meaning
OPPORTUNITY CODST: PRODUCTION POSSIBIITY
manage.
CURVE
❖ Central elements of economics are therefore
SCARCITY AND CHOICE. ❖ PRODUCTION POSSIBILITY CURVE > Indicates
❖ Wants are plentiful- we all want a lot of things, the combination of goods that can be produced
but the means are scarce. We, therefore, have using all the available resources.
to make choices all the time. ❖ Scarcity, choice and opportunity cost can be
illustrated with the aid of a production
1.2 SCARCITY, CHOICE AND OPPORTUNITY COST
possibilities curve or frontier.
❖ WANTS > Are human desires for goods and
1.3.1 PRODUCTION POSSIBILITY CURVE
services. Our wants are unlimited both goods
ASSUMPTIONS
and services.
❖ NEEDS > Are necessities, the things that are ❖ Simplified economy.
essential for survival, such as food, water, ❖ Two products are being produced.
shelter and clothing. Not absolutely unlimited. ❖ Limited resources are allocated.
❖ DEMANDS > Differs from wants, needs or ❖ Possible combinations of the product.
desires. There is a demand for good or service ❖ You have a choice in quantity or only one.
only if those who want to purchase it have the ❖ PPC shows the possible levels of output in the
necessary means to do so. There is a demand economy with limited resources and fixed
for goods and services (willingness to pay). production techniques.
1.2.1 WHY WE SAY RESOURCES ARE UNLIMITED? TYPES OF RESOURCES
❖ Resources are limited; therefore, goods and ❖ Natural resources(e.g. raw materials, land)
services that satisfy our wants are also limited. ❖ Human resources(e.g labour, skills from people)
❖ Scarcity forces us to make choice. Moreover, ❖ Man -made resources(e.g. machinery, capital)
scarcity is not equivalent to poverty.
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