Introduction to Economics

Why do we need to study economics?

“Economics studies how people make decisions to satisfy needs and wants”

NeedsNeeds

Unlimited needs

Maslow's hierarchy of needs

Maslow uses the following terms: Physiological, Safety, Belongingness and Love, Esteem, and Self-Actualization. There is a need to describe the pattern of the human motivation.

Limited resources

Scarcity of resources and need to choose

Scarcity happens when there are limited quantities of resources to meet unlimited need or desires.

ECONOMICS ECONOMICS

Unlimited needs Scarcity of resources

Scarcity

Opportunity cost

Choice

generating

implies

arises from the conflict between

Which materializes in

What will be produced?

How will it be produced?

For whom will it be produced?

Economic Systems

Market Economy

Command System

Mixed Economy

how a country answers these questions depends on the type of economic system they have

Opportunity cost of our decisions

Opportunity cost is the value of the best available option for someone who has chosen from among several mutually exclusive options.

ECONOMICS ECONOMICS

Unlimited needs Scarcity of resources

Scarcity

Opportunity cost

Choice

generating

implies

arises from the conflict between

Which materializes in

What will be produced?

How will it be produced?

For whom will it be produced?

Economic Systems

Market Economy

Command System

Mixed Economy

how a country answers these questions depends on the type of economic system they have.

Economic agents Economic agents

are the protagonists of the economy, and therefore they have to choose.

Firms Households

Productive factors

Labor

Land

are interrelated by

Capital

Incomes

Costs

For performing the

Economic agents

Circular flow of income

Govermment

Production

need

results in

Circular flow of income