Unit 1- The Nature of
Economics and the
Economy
Chapter1- Basic Principles of
Economics
Chapter 2 - Productive Resources and Economis Systems
Economics ⭐
Allocate of scarce resources
Fallacy ⭐
Opportunity Cost ⭐
Satisfy unlimited wants
Make decision
Choose X, Loose Y
"Real" cost not the price.
Next best alternatives
Facts and Values ⭐
Analytical(Positive) Economics
Normative(policy) Economics
Valued based
Statements which can be tested
Cannot be proved or disproved
Facts based
right or wrong
has been proved false
Post Hoc Fallacy
Fallacy of Composition
Fallacy of single causation
“Cause and event”
False cause
A mistaken belief
One cause rather than several
A hypothesis
A mistaken belief
Good for everyone
Production Possibilities ⭐
Law of increasing returns to scale
Law of increasing relative cost
Law of diminishing returns
decrease in the per unit output
inputs are increased
equal percentage increased
no inputs are constant
produce with the same resources
cost of additional units increases
Social Science ⭐
Science
Human Behaviour
History/Geography/Sociology/Anthropology
Productive Resources 🚩
Political Economics 🚩
Land ⭐
Labour ⭐
Capital ⭐
Tangible resources ⭐
Intangible resources ⭐
Entrepreneurship ⭐
Environment for enterprise
nature/ water/ fish/ minerals
Human capital
Physical capital
the skills and knowledge gained
factories & equipment used in production
People to produce good & services
Physical Assets
Visible
Nonphysical
Not visible
the component of human resources
raising capital/ organizing/ managing/ assembling
Values in the same manner
Social Values
neither producing waste
nor consuming unsustainable resources
Communism 🔥
Nationalization 🔥
Socialism 🔥
Capitalism 🔥
Production are owned by the state
Ownership: government & community
Right -wing
Karl Marx
Author of Communist Manifesto
Father of Communism
controlling investments and industries
Free-market
international trade is usually abolished
High taxes
Education and health
promote a large middle class
State ownership
charged with operating (public interest)
Business Enterpise
private property and free enterprise
based on competition
profit motive & increasing ones wealth
Systems
Command Economy
Tradition Economy
Market Economy
voluntary exchange in markets
decisions made by buyers and sellers
relies on habit, custom, or ritual
central authority is in command
a centrally planned economy
government has final say
decisions made by family and group
Advantages
For example : North Korea
For example : Japan
societies are more satisfied
agriculture, are left to be run by the people.
no shortage of jobs
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Laissez Faire capitalism 🔥
Separation of economy and state
Government leaves people's economic decisions alone
Economic Systems
A method
Make a better nation
satisfy people's needs
produce/distribute goods and servies
Influential People of Economics 👤
Adam Smith 👤
Karl Marx 👤
Thomas Malthus 👤
David Ricardo's 👤
Theory: Market although imperfect best left untouched
Scottish Economist Capitalism
First Comprehensive system of Political Economy
Depicted Starvation due to Over Population
Economies move towards a stand still
Profits rise = Expenses Rise = Profits Decrease = Expenses Decrease
Father of communism
Wealth to few = Masses are poor
Capitalism holds its own downfall
Chapter 4 Demand and Supply 💥
Changes in Demand 💥
Changes In Supply 💥
Equilibrium Price 💥
The Market 💥
The Number of Sellers
Cost to produce
Technology
Nature
Price Related
Cheaper to make = More Supply, Vise Versa
Example: Drought = Less Supply
Cheaper Production = More Supply
High Prices = More Supply, Vise Versa
Less Sellers = Less Supply, Vise Versa
Law of Demand 💥
Supply 💥
Demand 💥
Law of Supply 💥
Market 💥
Desire/Willingness to pay for a good
Increase in Price = Decrease in Demand, Vise Versa
Total Available amount of a good/service
Increase in Price = Increase of Supply, Vise versa
Direct Relationship between Price & Supply
Prices are set by individual consumer spending
Little government intervention
Tastes and Preferences
Substitutes
Populations
Expectations
Income
Price at which goods supplied equals goods demanded
More = Less Demand for Inferior Goods, Vise Versa
More Population = More Demand
Individual's tastes determine demand for a good
More Substitutes = Less Demand
Expect Higher Prices = Consumers Buy More Today
More Income = More Demand for Normal Goods, Vise Versa
Expect Lower Prices = Consumers Wait to Buy
John Keynes 👤
Spending is the key to employment
Founder of Macroecononmics
John Kenneth Galbraith 👤
Canadian Born Economist
Post- Keynsian Economics
Milton Friedman 👤
Individual's spend based off income
Free Market