Jan

• Economics


  The proper allocation and efficient use of available resources for the maximum satisfaction of human wants
• OIKONOMIA


  Greek word meaning Household Management
• Household


  Basic consuming unit
• Firms


  Basic producing unit
• Scarcity


  Shortage of resources
• Three Economic Problems


  • What to produce
  • How to produce it
  • For whom to produce
• Adam Smith was known to be the Father of Economics
• Labor


  Physical effort exerted in the production
• Wages


  Payment made to labor
• Interest


  Payment for the use of land
• Entrepreneur


  Brains behind the business
• Factors of Production


  • Land
  • Labor
  • Capital
  • Entrepreneur
• Demand


  Quantities of commodities which buyers are willing and able to purchase at a given price, time and place
• Supply


  Quantities of commodities which producers are willing to sell at a given price, time and place
• Good


  Anything which yields satisfaction to someone
• Types of Goods


  • Tangible
  • Intangible
• Capital goods


  Goods used in the production of other goods (buildings, machinery, and equipment)
• Essential goods


  Goods used to satisfy the basic needs of man (food, shelter and medicine)
• Luxury goods


  Goods man may do without, but are used to contribute to his comfort and well-being (perfume, chocolates and expensive cars)
• Economic good


  A good which is both useful and scarce
• Free good


  A good which is both useful and not scarce (e.g. electric fan)
• Production


  The act of making goods and services
• Consumption


  The act of using goods and services to satisfy wants
• Two factors that contribute to scarcity in the production of goods and services

  • Unlimited resources
  • Limited wants
• Equilibrium


  A situation in market where demand is equal to supply, also known as state of balance
• Market


  Means of interaction between buyers and sellers for trading and exchange
• Factors Affecting Demand


  • Consumer Tastes and Preference
  • Population
  • Consumer's Income
  • Prices of products
  • Consumer Expectation
• Factors Affecting Supply


  • Number of Sellers
  • Cost of Production
  • Expectation for Future Prices
  • Government Policies
  • Technological improvements
• Law of Demand


  As price increases, quantity demanded decreases and vice versa
• Law of Supply


  As price increases, quantity supplied increases and vice versa
• Surplus


  A situation in the market where the supply of goods and services is greater than demand
• Shortage


  A situation in the market where the demand for goods and services is greater than supply