Microeconomics IA – First Year
Inclusive Summary Notes
Topic 1 – The Study Field of Economics
The main economic problem– Scarcity
What is scarcity ? – There are unlimited wants and needs, but there
are limited resources.
There are 3 Fundamental Questions in Economics :
➢ What to produce ?
➢ How to produce ?
➢ For whom to produce ?
The 4 factors of production and their remuneration :
➢ Natural Resources – Rent
➢ Human Resources – Salaries and Wages
➢ Capital – Interest
➢ Entrepreneurship – Profit
In economics , Capital is referred to all man-made resources, that are
used in the for the production of other goods and services, e.g.,
Equipment, buildings, vehicles etc. As opposed to its definition in
accounting, Capital in economics does not refer to money/cash.
Opportunity Cost – The value to the decision maker of the best
alternative that is given up. Ask these questions to determine your
opportunity cost :
➢ How much does it cost ?
➢ What did you have to give up in order to do this ?
COPYRIGHT© BELONGS TO AUTHOR – N.LAHER 1
,Topic 2 – The Economist’s toolkit (concepts to
familiarise yourself with as an economist)
Economics is a social science
Ceteris Paribus – (Latin phrase often used in economics) All other
things remain constant.
Dependent and Independent Variables :
➢ Dependent variable – Responds to the change (Y-Axis)
➢ Independent variable – Induces the change (X- Axis)
Normative statements – Makes a value judgement (opinion of the
speaker)
Positive statements – Includes a statement of fact and hypothesis (can
be proven to be correct or false)
Time-series Graph – Measures time on the horizontal axis, and any
other variable on the vertical axis.
Types of patterns in economic graphs :
➢ Variables with positive relationship (Direct)
➢ Variables with negative relationship (Inverse)
➢ Variables that are unrelated
Formula to calculate the slope/gradient of a graph =
𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑖𝑛 𝑣𝑎𝑙𝑢𝑒𝑠 𝑜𝑛 𝑡ℎ𝑒 𝑦 − 𝑎𝑥𝑖𝑠
𝑆𝑙𝑜𝑝𝑒 =
𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑖𝑛 𝑣𝑎𝑙𝑢𝑒𝑠 𝑜𝑛 𝑡ℎ𝑒 𝑥 − 𝑎𝑥𝑖𝑠
COPYRIGHT© BELONGS TO AUTHOR – N.LAHER 2
, Topic 3 – Economic Systems
Types of Economic Systems :
➢ Traditional
➢ Command (Centrally planned system)
➢ Market (free market)
➢ Mixed (Most of the world’s economies are mixed)
Property rights
- Full ownership has to have all basic rights :
➢ The right to dispose/sell property
➢ The right to use property as owner desires
➢ The right to receive income made from property
- Partial ownership has to have only 0ne or two of the above-
mentioned rights of full ownership .
COPYRIGHT© BELONGS TO AUTHOR – N.LAHER 3
Inclusive Summary Notes
Topic 1 – The Study Field of Economics
The main economic problem– Scarcity
What is scarcity ? – There are unlimited wants and needs, but there
are limited resources.
There are 3 Fundamental Questions in Economics :
➢ What to produce ?
➢ How to produce ?
➢ For whom to produce ?
The 4 factors of production and their remuneration :
➢ Natural Resources – Rent
➢ Human Resources – Salaries and Wages
➢ Capital – Interest
➢ Entrepreneurship – Profit
In economics , Capital is referred to all man-made resources, that are
used in the for the production of other goods and services, e.g.,
Equipment, buildings, vehicles etc. As opposed to its definition in
accounting, Capital in economics does not refer to money/cash.
Opportunity Cost – The value to the decision maker of the best
alternative that is given up. Ask these questions to determine your
opportunity cost :
➢ How much does it cost ?
➢ What did you have to give up in order to do this ?
COPYRIGHT© BELONGS TO AUTHOR – N.LAHER 1
,Topic 2 – The Economist’s toolkit (concepts to
familiarise yourself with as an economist)
Economics is a social science
Ceteris Paribus – (Latin phrase often used in economics) All other
things remain constant.
Dependent and Independent Variables :
➢ Dependent variable – Responds to the change (Y-Axis)
➢ Independent variable – Induces the change (X- Axis)
Normative statements – Makes a value judgement (opinion of the
speaker)
Positive statements – Includes a statement of fact and hypothesis (can
be proven to be correct or false)
Time-series Graph – Measures time on the horizontal axis, and any
other variable on the vertical axis.
Types of patterns in economic graphs :
➢ Variables with positive relationship (Direct)
➢ Variables with negative relationship (Inverse)
➢ Variables that are unrelated
Formula to calculate the slope/gradient of a graph =
𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑖𝑛 𝑣𝑎𝑙𝑢𝑒𝑠 𝑜𝑛 𝑡ℎ𝑒 𝑦 − 𝑎𝑥𝑖𝑠
𝑆𝑙𝑜𝑝𝑒 =
𝐷𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑖𝑛 𝑣𝑎𝑙𝑢𝑒𝑠 𝑜𝑛 𝑡ℎ𝑒 𝑥 − 𝑎𝑥𝑖𝑠
COPYRIGHT© BELONGS TO AUTHOR – N.LAHER 2
, Topic 3 – Economic Systems
Types of Economic Systems :
➢ Traditional
➢ Command (Centrally planned system)
➢ Market (free market)
➢ Mixed (Most of the world’s economies are mixed)
Property rights
- Full ownership has to have all basic rights :
➢ The right to dispose/sell property
➢ The right to use property as owner desires
➢ The right to receive income made from property
- Partial ownership has to have only 0ne or two of the above-
mentioned rights of full ownership .
COPYRIGHT© BELONGS TO AUTHOR – N.LAHER 3
