CONTENT:
1. STUDY FIELD OF ECONOMICS
2. ECONOMIST’S TOOLKIT
3. ECONOMIC SYSTEMS
4. PPC
5. CIRCULAR FLOW MODEL
6. DEMAND, SUPPLY + PRICES
7. CONSUMER + PRODUCER SURPLUS
8. CHANGE IN DEMAND + SUPPLY
9. GOVERNMENT INTERVENTION
10. PRICE ELASTICITY
11. THEORY OF DEMAND
12. THEORY OF SUPPLY
13. PERFECT + INPERFECT COMPETITION
14. LABOUR MARKET
A SUMMARY OF TUTORIAL 501/3/2019 FOR
ECS1501 – SUMMARISED INTO 82 PAGES TO
HELP YOU STUDY AND PREPARE FOR EXAMS /
TO COMPLETE ASSIGNMENTS
, 1. THE STUDY FIELD OF ECONOMICS
THE ECONOMIC PROBLEM OF SCARCITY
The economic problem = also referred to as the scarcity problem.
Resources available for the production of goods and services are limited and needs and wants
for goods and services are unlimited.
UNLIMITED NEEDS AND WANTS AND SCARCE RESOURCES
NEEDS (UNLIMITED) WANTS (UNLIMITED) SCARCE RESOURCES
(LIMITED)
Things we really require to Things we feel may improve our Resources include everything in
survive lives but not really need to survive. the world around us that we can
use to produce goods / services to
Food, clean water, shelter, basic Luxury car, smartphone, concert satisfy our needs and wants.
clothing tickets
Items that bring satisfaction
3 main groups:
(feeling of satisfaction: utility)
Natural resources, such as land,
water, minerals, animals and plants
Human resources, such as
entrepreneurs or labour such as
economists, builders, architects,
accountants, lawyers and cleaners
Man-made resources such as
machines and infrastructure that
are available to use to produce
goods – in economics we call these
resources capital.
SCARCE GOODS AND FREE GOODS
SCARCE GOODS FREE GOODS
A scarce good is one that has alternative A free good is one for which the choice of one
uses. use does not require that we give up another.
Eg. land – will you build on it or farm on it? One example of a free good is gravity. One
Virtually everything is scarce. person’s use of gravity is not an alternative to
another person’s use.
Not many free goods.
, THE THREE FUNDAMENTAL QUESTIONS
WHAT GOODS AND SERVICES HOW TO PRODUCE THE FOR WHO TO PRODUCE
TO PRODUCE GOODS AND SERVICES
Since we cannot produce all The more effectively and We produce goods and
the goods and services that efficiently resources are used, services to satisfy people’s
people need and want we the more goods and services needs and wants. But which
need to decide what is the can be produced, and the more people’s needs and wants?
needs and wants can be
best combination of goods Who gets the houses, the
satisfied. So, efficient and
and services that we should food, the computers, the
effective use of our scarce
produce. This decision then resources contributes to cars that we have produced.
requires that we allocate our economic growth and the This question deals with the
scarce resource to the wealth of our nation. distribution of goods and
production of these goods services and it is one of the
and services. most challenging questions
to answer.
OVERVIEW – FACTORS OF PRODUCTION
PRIMARY FACTORS SECONDARY FACTORS
NATURAL RESOURCES LABOUR CAPITAL ENTREPRENEURSHIP
(LIMITED)
A natural resource is anything the human effort a factor of production
that people can use which that can be applied that has been
comes from nature to the production of produced for use in
goods and services the production of
Air, water, soil, space, land, other goods and
raw materials,wind services
Can be renewable (trees), flow
(wind / solar power) and non-
renewable (can’t be replaced
once used up – coal)
These factors of production are important for two reasons: Without them, there can be no
production of goods and services. Secondly important in a market system as it is from the
ownership of the factors of production that households derive an income.
Income earned from the factors of production are:
Labour Capital Entrepreneurship Land
Wages / salaries Interest Profits Rent
OVERVIEW – OPPORTUNITY COST
Whenever a choice is made, it involves a cost that is known as the opportunity cost of the
choice.
"Opportunity cost is the value to the decision maker of the best alternative that is given up."
, 2. THE ECONOMIST TOOLKIT
Economics is considered a social science –
can predict people.
Research is conducted witin a scientific method, a systematic set of procedures through which
knowledge is created. In the scientific method, hypothesis are suggested and then tested.
Hypothesis: an assertion of a relationship between 2 or more variables that couild be proven to
be false. A statement is not a hypothesis if no conceivable test can show it to be false. If a test
reveals that a hypothesis is false, then the hypothesis is rejected or modified. A hypothesis that
is not rejected and that wins general acceptance is called a theory. A theory that was even
more tested and has won virtually universal acceptance becomes a law.
Researchers often examine relationships between variables. A variable is something whose
value can change. By contrast, a constant is something whose value does not change. The speed
at which a car is traveling is an example of a variable. The number of minutes in an hour is an
example of a constant.
MODELS IN ECONOMICS
A model is a set of simplifying assumptions about some aspect of the real world. Models are
always based on assumed conditions that are simpler than those of the real world, assumptions
that are necessarily false. A model of the real world cannot be the real world.
Economists often use graphs to represent economic models. Models in economics also help us
to generate hypotheses about the real world.
TESTING HYPOTHESES IN ECONOMICS
Several problems exist in interpreting any set of economic data. One problem is that several
things may be changing at once; another is that the initial event may be unrelated to the event
that follows. The next two sections examine these problems in detail.
The all-other-things-unchanged problem (CETERIS PARIBUS)
Ceteris paribus is a Latin phrase that means “all other things unchanged.”
When things change it will have an effect on testing a hypthesis. Such problems are likely to
affect any analysis of economic events. We cannot ask the world to stand still while we conduct
experiments in economic phenomena. Economists employ a variety of statistical methods to
allow them to isolate the impact of single events such as price changes, but they can never be
certain that they have accurately isolated the impact of a single event in a world in which
virtually everything is changing all the time.
1. STUDY FIELD OF ECONOMICS
2. ECONOMIST’S TOOLKIT
3. ECONOMIC SYSTEMS
4. PPC
5. CIRCULAR FLOW MODEL
6. DEMAND, SUPPLY + PRICES
7. CONSUMER + PRODUCER SURPLUS
8. CHANGE IN DEMAND + SUPPLY
9. GOVERNMENT INTERVENTION
10. PRICE ELASTICITY
11. THEORY OF DEMAND
12. THEORY OF SUPPLY
13. PERFECT + INPERFECT COMPETITION
14. LABOUR MARKET
A SUMMARY OF TUTORIAL 501/3/2019 FOR
ECS1501 – SUMMARISED INTO 82 PAGES TO
HELP YOU STUDY AND PREPARE FOR EXAMS /
TO COMPLETE ASSIGNMENTS
, 1. THE STUDY FIELD OF ECONOMICS
THE ECONOMIC PROBLEM OF SCARCITY
The economic problem = also referred to as the scarcity problem.
Resources available for the production of goods and services are limited and needs and wants
for goods and services are unlimited.
UNLIMITED NEEDS AND WANTS AND SCARCE RESOURCES
NEEDS (UNLIMITED) WANTS (UNLIMITED) SCARCE RESOURCES
(LIMITED)
Things we really require to Things we feel may improve our Resources include everything in
survive lives but not really need to survive. the world around us that we can
use to produce goods / services to
Food, clean water, shelter, basic Luxury car, smartphone, concert satisfy our needs and wants.
clothing tickets
Items that bring satisfaction
3 main groups:
(feeling of satisfaction: utility)
Natural resources, such as land,
water, minerals, animals and plants
Human resources, such as
entrepreneurs or labour such as
economists, builders, architects,
accountants, lawyers and cleaners
Man-made resources such as
machines and infrastructure that
are available to use to produce
goods – in economics we call these
resources capital.
SCARCE GOODS AND FREE GOODS
SCARCE GOODS FREE GOODS
A scarce good is one that has alternative A free good is one for which the choice of one
uses. use does not require that we give up another.
Eg. land – will you build on it or farm on it? One example of a free good is gravity. One
Virtually everything is scarce. person’s use of gravity is not an alternative to
another person’s use.
Not many free goods.
, THE THREE FUNDAMENTAL QUESTIONS
WHAT GOODS AND SERVICES HOW TO PRODUCE THE FOR WHO TO PRODUCE
TO PRODUCE GOODS AND SERVICES
Since we cannot produce all The more effectively and We produce goods and
the goods and services that efficiently resources are used, services to satisfy people’s
people need and want we the more goods and services needs and wants. But which
need to decide what is the can be produced, and the more people’s needs and wants?
needs and wants can be
best combination of goods Who gets the houses, the
satisfied. So, efficient and
and services that we should food, the computers, the
effective use of our scarce
produce. This decision then resources contributes to cars that we have produced.
requires that we allocate our economic growth and the This question deals with the
scarce resource to the wealth of our nation. distribution of goods and
production of these goods services and it is one of the
and services. most challenging questions
to answer.
OVERVIEW – FACTORS OF PRODUCTION
PRIMARY FACTORS SECONDARY FACTORS
NATURAL RESOURCES LABOUR CAPITAL ENTREPRENEURSHIP
(LIMITED)
A natural resource is anything the human effort a factor of production
that people can use which that can be applied that has been
comes from nature to the production of produced for use in
goods and services the production of
Air, water, soil, space, land, other goods and
raw materials,wind services
Can be renewable (trees), flow
(wind / solar power) and non-
renewable (can’t be replaced
once used up – coal)
These factors of production are important for two reasons: Without them, there can be no
production of goods and services. Secondly important in a market system as it is from the
ownership of the factors of production that households derive an income.
Income earned from the factors of production are:
Labour Capital Entrepreneurship Land
Wages / salaries Interest Profits Rent
OVERVIEW – OPPORTUNITY COST
Whenever a choice is made, it involves a cost that is known as the opportunity cost of the
choice.
"Opportunity cost is the value to the decision maker of the best alternative that is given up."
, 2. THE ECONOMIST TOOLKIT
Economics is considered a social science –
can predict people.
Research is conducted witin a scientific method, a systematic set of procedures through which
knowledge is created. In the scientific method, hypothesis are suggested and then tested.
Hypothesis: an assertion of a relationship between 2 or more variables that couild be proven to
be false. A statement is not a hypothesis if no conceivable test can show it to be false. If a test
reveals that a hypothesis is false, then the hypothesis is rejected or modified. A hypothesis that
is not rejected and that wins general acceptance is called a theory. A theory that was even
more tested and has won virtually universal acceptance becomes a law.
Researchers often examine relationships between variables. A variable is something whose
value can change. By contrast, a constant is something whose value does not change. The speed
at which a car is traveling is an example of a variable. The number of minutes in an hour is an
example of a constant.
MODELS IN ECONOMICS
A model is a set of simplifying assumptions about some aspect of the real world. Models are
always based on assumed conditions that are simpler than those of the real world, assumptions
that are necessarily false. A model of the real world cannot be the real world.
Economists often use graphs to represent economic models. Models in economics also help us
to generate hypotheses about the real world.
TESTING HYPOTHESES IN ECONOMICS
Several problems exist in interpreting any set of economic data. One problem is that several
things may be changing at once; another is that the initial event may be unrelated to the event
that follows. The next two sections examine these problems in detail.
The all-other-things-unchanged problem (CETERIS PARIBUS)
Ceteris paribus is a Latin phrase that means “all other things unchanged.”
When things change it will have an effect on testing a hypthesis. Such problems are likely to
affect any analysis of economic events. We cannot ask the world to stand still while we conduct
experiments in economic phenomena. Economists employ a variety of statistical methods to
allow them to isolate the impact of single events such as price changes, but they can never be
certain that they have accurately isolated the impact of a single event in a world in which
virtually everything is changing all the time.
