Economics and You
What is Economics?
Why study Economics?
We need to make choices
all the time! WHY?
What is a Want?
A want is a desire
for goods and
services
I want to
eat a
banana.
(Unlimited) Wants

Human wants are
unlimited and can be
 concrete or
 abstract

Can you give some
examples?
Which one is a Concrete want and
which one is an abstract ?
Example 1:
• I want a sandwich
for lunch.
This is a
concrete want
Example 2:
• I need to be loved.
This is an
abstract want
Wants are also…
We always prefer
more goods and
services
 When some of
our wants are
satisfied, we will
always have new
wants
 So we can never
be fully satisfied.

I want
MORE
…!!!
Thinking time!
• Suppose Mary bought
4 ice creams, she said
that she had had
enough, so her want
for ice-cream is
limited – no more ice
cream?!
• Does her behavior
show that human
wants are limited?
Think about it …
• What are the
means that are
needed to
fulfill these
needs and
wants?
I want to
eat bananas,
what
should I do?
Yes, we use MONEY to buy,
but …
• wait a minute!
Before we buy the
bananas
• Some one must need
to produce the
bananas first
• What do we need to
use to produce
bananas?
Productive Resources
(FOUR Types of Factors of production)
• CAPITAL: e.g. MACHINES and EQUIPMENT,
etc.
Man-made resources
• ENTREPRENEUR: the OWNER of a
company
Human resources
• LAND: natural resources e.g. sunlight, air,
crude oil, dolphins in the open sea, etc.
Natural resources
• LABOUR: e.g. workers, managers, teachers,
etc.
Human resources
Factors of production
LABOUR
Human
resources
ENTREPRENEUR
Production
Natural resources
LAND
Man-made resources CAPITAL
(Input)
Goods
and
services
(Output)
What are all these Resources
have in common?
• Resources have either money value (a camera) or
non-money value (air, parental love)
• Directly or indirectly used to satisfy human wants
• Resources, in general, have alternative uses.
Limited supply
So with unlimited wants and
limited resources, we face a
problem – the problem of
SCARCITY
Unlimited
wants
Limited
resources
Scarcity
How to satisfy
unlimited wants
with limited
resources?
SCARCITY
(a relative concept)
 the situation in which
the limited resources
available are
insufficient to satisfy
the unlimited wants
 a universal
phenomenon
The THREE RICHEST men in
the world according to Forbes
Carlo Slim
Bill Gates
Warren Buffett
Does the richest men face the problem of scarcity?
Carlo Slim, the richest man in the world. In a
recent survey in 2010, the estimated value of
his personal assets was about US$53.5billion.
If I have enough money to satisfy all
of my wants, does this mean that I
don’t face the problem of scarcity?
Why?
• No. He still has to face the problem of scarcity.
• Human wants are unlimited.When some wants
are satisfied, we develop other ones.
• Human wants can never be fully satisfied.
What seems to be the
scarcest thing around? For
a lot of people, it is TIME.
You can be the richest
person on earth and still not
have “enough time.” Why is it
valuable to you?
Choice and (opportunity)
cost
Unlimited wants
Scarcity
Choice
Limited resources
(Opportunity) cost : When we make a choice, we
have to bear a cost – you give up an opportunity
of choosing some other things!
For example,
A plot of land could have
several possible uses, it can
be used to develop, for example:
Choice A: a residential building
OR
Choice B: a commercial building
• Let’s assume the money used to
build a residential building and a
commercial building are the same
(say, $1 billion).
• What do the developer have to
give up, if he decides to use the
land to construct a residential
building,?
• The choice of constructing a
commercial building
What does that mean?
• In other words, the cost of building a
residential building is to give up the
choice of building a commercial
building
You have two choices of
how to spend a Saturday
night.
I like
seeing
movie
better!
2nd Choice: Going online
1st choice: To see a movie
Which option will you choose? Why?
I like
seeing
movie
better!
What is the cost of choosing the above option,
i.e. going to see a movie?
Going online is the cost of going
to see a movie. Why???
Choice and Cost
Unlimited
wants
Limited
resources
Scarcity
Choice
Chosen option
(the BEST choice)
COST =
(NEXT
BEST choice given up )
The 3rd Option
The 1st Option
The 2nd Option
Singing Karaoke in a
friend’s house
Surfing the Internet at home
Playing basketball in a park
What is the cost of Joey’s
decision to surf the
Internet at home?
As it is the next best
choice given up.
Joey
• In other words, the cost of Joey
surfing the internet at home is playing
basketball in a park.
• But why NOT all the choices given up?
• Even if Joey does not choose the 1st
option (the BEST option to Joey), she
will not choose all the other options
to do, she will …
only choose the NEXT BEST option –
i.e. the 2nd option !!!
The 3rd Option
The 1st Option
Surfing the
Internet at home
Playing basketball
in a park
The 2nd Option
Singing
Karaoke in a
friend’s house
Conclusion
• Back to the questions: What is
economics? Why study economics?
• All people face the problem of
scarcity.
• Economics tries to uncover the
processes that affect how people’s
lives come to be what they are; and
• to identify ways to help improve these
processes and in turn better futures