Chapter 1: The Why and Who of Economics
This Chapter is all about WHY do we have economics as a discipline and
WHO is involved in this process or system Concepts are explained and
discussed that form the basis of the decision-making process of all role
players in the economy.
The Economic Viewpoint
Scarcity and choice
Limited goods and services
Limited time
What is Economics?
It is the study of how individuals, business and institutions make social choices to
optimize their level of satisfaction under conditions of scarcity.
What is opportunity cost?
The opportunity cost of an activity is the value of the next best alternative that must
be forgone to undertake this activity.
The very basics of the Economic
Perspective/Economics as a
science
Economics as a science are based on the This choices are based on the
fact that there are limited resources and opportunity cost involved and it’s not only
unlimited demands and therefor based on Rands and cents. The
society/individuals/business/government outcome/time involved/influence etc. all
need to make choices (THEY CANT Examples of Opportunity cost
play a role in the decision making
HAVE IT ALL) process.
, Individual- Holiday or Car? – Individual chooses to buy the car so the
becomes the opportunity cost
Business- Machine A or Machine B – Company chooses Machine B so
becomes the opportunity cost
Government- New School or New Road? – Government chooses to build the
road so becomes the opportunity cost
Think of how you as a student applied the
concept of opportunity cost in the last 24
hours. Your choices was always between
more than one option in terms of How I spend
my money, time , etc. – WHY did you choose
the options you did – EVER SAID ITS NOT
WORTH IT
The Economic Perspective
Rational (purposeful) behaviour
‘Rational self-interest’ an assumption of economics
Decisions not free from mistakes or unaffected by emotions or feelings
Desire to maximize level of satisfaction (utility)
Rational behaviour is an important assumption. If
economic principles are not based on Rational
behaviour we cant make the prediction that people
Consumers
will buy more of a commodity of the price drops.
The rational action / assumption is that people will
act rationally and buy more of a commodity if the
price decrease.
This Chapter is all about WHY do we have economics as a discipline and
WHO is involved in this process or system Concepts are explained and
discussed that form the basis of the decision-making process of all role
players in the economy.
The Economic Viewpoint
Scarcity and choice
Limited goods and services
Limited time
What is Economics?
It is the study of how individuals, business and institutions make social choices to
optimize their level of satisfaction under conditions of scarcity.
What is opportunity cost?
The opportunity cost of an activity is the value of the next best alternative that must
be forgone to undertake this activity.
The very basics of the Economic
Perspective/Economics as a
science
Economics as a science are based on the This choices are based on the
fact that there are limited resources and opportunity cost involved and it’s not only
unlimited demands and therefor based on Rands and cents. The
society/individuals/business/government outcome/time involved/influence etc. all
need to make choices (THEY CANT Examples of Opportunity cost
play a role in the decision making
HAVE IT ALL) process.
, Individual- Holiday or Car? – Individual chooses to buy the car so the
becomes the opportunity cost
Business- Machine A or Machine B – Company chooses Machine B so
becomes the opportunity cost
Government- New School or New Road? – Government chooses to build the
road so becomes the opportunity cost
Think of how you as a student applied the
concept of opportunity cost in the last 24
hours. Your choices was always between
more than one option in terms of How I spend
my money, time , etc. – WHY did you choose
the options you did – EVER SAID ITS NOT
WORTH IT
The Economic Perspective
Rational (purposeful) behaviour
‘Rational self-interest’ an assumption of economics
Decisions not free from mistakes or unaffected by emotions or feelings
Desire to maximize level of satisfaction (utility)
Rational behaviour is an important assumption. If
economic principles are not based on Rational
behaviour we cant make the prediction that people
Consumers
will buy more of a commodity of the price drops.
The rational action / assumption is that people will
act rationally and buy more of a commodity if the
price decrease.
