Lecture 1 By Dimuth Nambuge Office Hours : Room no :701

What Is Economics??

Definition of Economics

o Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses. (L.Robbins 1935) o Economics is the social science that examines how people choose to use limited or scarce resources in attempting to satisfy their unlimited wants.

Wants (dopyt) Needs (potreby) Scarcity (nedostatok) Factors of Production/Resources

Wants

This is simply the desire of the citizens of a country. Each individuals wants are different and varies time to time.

Needs
These are basic requirements human must have in according to survive. A need is something that you have to have. Want is something you would like to have

Scarcity
Is the fundamental economic problem of having seemingly unlimited human needs and wants, in a world of limited resources. Meaning that society has limited productive resources to fulfil unlimited human needs and wants.

Opportunity Cost
Is the cost we pay when we give up something to get something else. There can be many alternatives that we give up to get something else, but the opportunity cost of a decision is the most desirable alternative we give up to get what we want. Example: Guns or Butter

Factors of Production
These are the resources employed to produce goods and services. They facilitate production but do not become part of the final product. The efficiency of using factors of production determines the measure of success a nation has. Land Capital Natural Resources Man made physical goods used to produce other goods and services Labour - Labour is the human input into the production. Enterprise - The entrepreneurship provides the initial ideas, They risk their own resources in business ventures

What to produce? How to produce? For whom to produce?

These are the questions all nations must ask when dealing with scarcity and efficiently allocating their resources.

Gross Domestic Production Average wage level Work Force Employment Rate Unemployment Rate Balance of Payments Inflation Rate Interest Rates Exchange Rates

Free Products
Air, sunshine are and other items so plentiful no one could own them

Goods
Tangible commodities. These are produced, bought, sold, and traded. Consumer Goods Goods that are intended for final use by the consumer. Capital Goods Goods used in the process of production of other goods.

Services
An Act by one person or group that benefits another. Services are intangible.

Durable Goods
Goods intended to use for a long period of time.

Non Durable Goods

Goods intended to use for a short period of time.

Consumers
People who use these Goods and Services

Value
An assignment of worth. The assignment is usually based upon the utility (usefulness) or scarcity of the item (supply and demand)

Paradox of Value
Assignment of the highest value to those things we need the least.

Wealth
The sum of collection of those economic products that are tangible, scarce and useful.

Productivity
The amount of output per unit of input. There are different ways of measuring productivity.

Demand
Demand for a product or service is defined as the quantity of that particular product or service consumers are willing to purchase. Factors that affect the demand for a product
Price of the Product Income of the consumers Availability of product Alternative products Promotion of the product Demographics

Supply

The supply of a product is defined as the quantity of the product which producers or manufacturers are willing to produce and sell. Factors that affects the Supply of a product
Price of inputs (Raw materials, Labor) Availability of Inputs Technology changes Government policies Natural influences

www.ft.com www.economist.com http://dictionary.cambridge.org/ www.sciencedirect.com