Unit 1: Introduction to economics

• Economics is the social science that focuses on the production, distribution and consumption of goods and services. It is revolved around the study of scarcity. It is a social science because it studies the behaviour of individuals and their interactions.
• Economics: is the study of choices leading to the best possible use of scarce resources to best satisfy unlimited human needs and wants.
• Microeconomics: studies the behaviour of individual decision-making (consumers and producers) units in an economy.
• Macroeconomics: studies the economy as a whole to obtain a broad or overall picture of the economy.
• Scarcity: refers to the limited number of resources available for unlimited human needs and wants.
• Choice: refers to the act of how different decision-makers select between competing alternative options when faced with limited resources and unlimited wants.
• Efficiency: refers to making the best possible use of scarce resources to avoid resource waste.
• Equity: Idea of being fair or just. Identified with equality in the distribution of income, wealth, and human opportunity.
• Economic well-being: refers to levels of prosperity, economic satisfaction and standard of living among society.
• Sustainability: refers to preserving the environment so that it can continue to satisfy needs and wants into the future.
• Change: the world is in a continuous state of change at institutional, structural, technological, economic, social levels.
• Interdependence: refers to the idea that economic decision-makers interact with and depend on each other.
• Intervention: typically refers to government intervention, meaning the government becomes involved with the working of markets.
• PPC model: represents all the combinations of the maximum amounts of 2 goods that can be produced using full employment of resources and efficiency in production.
• Opportunity cost: the value of the next best alternative that must be given up or sacrificed to obtain something else.
• Free good: good that is not scarce hence, has zero opportunity cost.
• Economic good: good that is scarce because it is a naturally occurring scarce resource or because it is produced by scarce resources. They have an opportunity cost > 0.
• Market method: resources are owned by private individuals or groups of individuals, and it is mainly consumers and firms who make economic decisions by responding to prices that are determined in markets.
• Command method: resources are owned by the government, which makes economic decisions by commands (legislation and regulation).
• Government intervention is when the government makes decisions that affect the economy because the government intervenes in the working of markets.
• The circular flow of income shows that in any given time period, the value of output produced in an economy is equal to the total income generated in producing that output, which is equal to the expenditures made to purchase that output.
• Imports definition: are goods and services produced in other countries and purchased by domestic buyers.
• Exports definition: are goods and services produced domestically and purchased by foreigners. When an economy has international.
• Positive economics: study of economics based on the scientific method, used to arrive at knowledge about the economic world. It includes descriptions, models, hypotheses, theories and laws.
• Ceteris Paribus: other things equal/all other things are assumed to be constant or unchanging.
• Normative economics: forms the basis of judgements about what economic goals and economic policies ought to be.
• Equity the idea of being fair or just. The idea of equity or fairness is a normative concept because fairness depends on people’s beliefs or value judgements, which differ from person to person.
• Equality is the state of being the same with respect to something. Equality is a positive concept, since two or more things are either equal or not equal based on a measure.
• The Law of increasing Opportunity Cost: As the output of one good increases, the opportunity cost in terms of other goods tends to increase.
• Economic growth definition: increases in the quantity of output produced in an economy over a period of time.
• Actual growth: movement from one point inside the PPC to another point closer to the PPC. It is caused by reduction in unemployment and increases in efficiency in production.
• Growth in production possibilities: an outward shift of the PPC. More growth can occur if there is growth in PP. It is caused by increases in the quantity of resources, improvements in the quality of resources