Chapter 1 - Intro Eco162
Chapter 1 - Intro Eco162
Chapter 1 - Intro Eco162
DEFINITION
CHAPTER 1
Introduction to economics
Definition of economics
Economic concepts
Production Possibilities
Curve (PPC) with calculation
OF ECONOMICS
FACTORS
macroeconomics
microeconomics
Is the study of individual
units in the economy. It
focuses on the price theory
, production theory and
distribution theory.
Factors of
production
LABOR
Cont..
CAPITAL
ENTREPRENEURSHIP
Explanations
LAND
Example :
inflation,unemployment,eco
nomic slowdown or growth
and etc
OF PRODUCTION
BASIC ECONOMIC
Capital is equipment, factories, machines
and tools that man creates to help them
produce goods and services. The
productivity of capital is limited by the
state of technology.
SCARCITY
CHOICE
CONCEPTS
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THE
CONT.
Making a choice is not easy task. Each time you choose to
use resources for a purpose, it means you must forgo some
other purpose. Making a choice involves a sacrifice. In
economics that is what we mean by the term opportunity
cost. Opportunity cost is the best alternative(good or service)
sacrificed for a chosen alternative which gives more
satisfaction
Cont.
HOW TO
PRODUCE
FOR WHOM TO
PRODUCE
MICROECONOMICS
MACROECONOMICS
It deals with household income only. It deals with the whole national
income
It focuses on the factors that
influence the production of a
particular of particular product
and he behavior of individual
industries.
BASIC ASSUMPTION
OF
PPC
Used
The
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POSSIBILITY
CORN
CLOTH
20
18
15
11
Point outside the PPC shows the main basic economic concept: SRACITY. At
this point with limited resources and technology, unable to produce.
Point along the PPC shows the second concept: CHOICES. Such as point a,
b, c, d, e) individual will make choices among various possible combinations of
2 goods to give more satisfaction.
Movement from one point shows the third concept: OPPORTUNITY COST.
(Such as point b to c) involves an opportunity cost having less of one good to
get more of another.
Sewing Machine
16
14
Increase in population
12
Good x
10
8
Good y
PPC shift inwards- because natural disaster, decrease in resources, etc
Decrease in population
4
2
0
Butter
Good x
SHIFTS
OF
PPC HAPPEN
ONLY
Good y
Good x
Technology increases the production of good X only
Good y
Good x
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SHAPE OF PPC
i.
20
22
iv.
ECONOMIC SYSTEM
4.
2.
Command economy
The govt. owns and governs economic resources
Main objec. is to make sure that the people get whatever
they need
23
3.
1.
21
iii.
HOW to produce?
ii.
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CAPITALISM
CHARAC:-
1. Prod. accord.
to need
(variety of
goods)
2. Economic
freedom
3. R & D
1. Prod. Based
on needs
2. Equitable
income and
wealth
distribution
3. Better
allocation of
resources
4. Social welfare
MIXED
1. Public and
private
ownership
2. Private and
govt.
economic
planning
CAPITALISM
Demerits
iv.Concept
ii.
27
i.
of Ukhuwwah
Concept of Tazkiyyah
iii.
of Khalifah
v.Concept
Concept of Rububiyyah
ii.
MIXED
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SOCIALISM
1. Lack of
incentives &
initiative by
individuals
2. Loss
economic
freedom and
consumer
sovereignty
3. Absence of
competition
Concept of Tauhid
i.
1. Inequality
distribution of
income
2. Lack of social
welfare
3. Misallocation
of resources
4. Social cost
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1. Public
ownership
2. Central
planning
25
Merits
SOCIALISM
1. Private
ownership
2. Freedom of
enterprise
and choice
3. Consumers
sovereignty
4. Minimum
govt.
intervention
5. Price system
1.Dharuriyyah
2.
How to produce?
Most cost effective and efficient method
2.Hajiyyah
3.Kamaliyyah/Tahsiniyyah
3.
goods
Basic goods
Must have to live food, shelter, clothing
goods
Comfort goods
Makes life more better car, television, refrigerator
goods
Luxury goods
Without it live can still go on comfortably bungalow, BMW
4.Tarafiyyah
30
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goods