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Introduction to Economics

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Miss Cummins

on 15 September 2016

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Transcript of Introduction to Economics

Introduction to Economics
Ms Cummins
What is Economics?
Social Science
Needs and Want
Need = immediate
Opportunity Cost
Economics is based on theories !
Economic laws are then deducted from these theories
The Four Factors of Production
Markets
Where buyers and sellers meet

Physical and virtual

Three main types of markets
Theories
Human Behaviour
Money
Consuming
Supply/Demand
Resources
Want = not necessary for survival
This is the cost of foregone alternatives (choice)
It's a sunny day, you're hot and thirsty. You have
€1
.
Do you buy a drink or ice cream? You don't have enough for both. So you have to make a
choice
.
The product that you don't buy is known as the
opportunity cost.
OR
Opportunity cost is very important in Economics
It involves making a
choice
on scarce
resources

How do Economists draw up these Theories ?
Two methods:
Deductive
Inductive
Deductive Method
Step 1: Start with statements (hypotheses) that we believe are true
Step 2: Apply this statement to a situation
Step 3: Arrive at a conclusion. This conclusion will be accurate assuming the original statement is accurate
Example 1
Step 1: All animals will die
Step 2: A horse is an animal
Step 3: Therefore, all horses will die
Economic Example
Step 1: If the price of a good increase, fewer people will buy it
Step 2: A can of cola is a product
Step 3: If the price of the cola increases, fewer people will buy it
Inductive Method
Step 1: Researcher collects data
Step 2: Researcher looks for a pattern
Step 3: From this pattern, a conclusion is drawn, which then becomes an economic law
Real life situations
Example
Step 3: This leads to a general principle that in terms of gate receipts, Tuesdays are bad for football matches
Step 2: The researchers spots a pattern that there was a 50% drop in attendance when games are played on Tuesdays
Step 1: A researcher examines attendance at 40 football grounds
Particular case --> General statement
General statement ---> Particular situation
These laws are statements that under certain conditions, certain people will behave in certain ways

They
do not
apply to everyone

General statements
about human behaviour


Enterprise
: The factor of production which takes that initiative and bears the risk involved in setting up a business to produce goods
Land
: Anything provided by nature that helps in the production of wealth
Capital
: Anything man-made that assists in the production of wealth
Labour
: The human effort involved in creating wealth
Factor Markets
Intermediate Markets
Final Markets
Factor Market
Factors of production are bought and sold
Each individual products starts its life requiring land, labour, capital and enterprise
An entrepreneur buys these factors to begin making a good
Intermediate Markets
Deal with partly finished goods
After they are sold/bought they will be made ready for sale, with added value
People can buy/sell goods to someone else for a small profit
Final Markets
Buying and selling of finished goods
Example of three markets
People employed to pick apples
Owner sells to juicing company
Juicing company makes apple juice and sells it
Economic Systems
Choice is an important element of Economics

We also have to choose what types of goods we produce as resources are scarce
These decisions can be made . . .
Entirely by private individuals -
FREE ENTERPRISE
Private business people make the decisions on goods/services to be sold

The US is an example
Also known as a capitalist system
Entirely by the government -
CENTRALLY PLANNED ECONOMY
Governments make the decisions on goods/services to be produced

Cuba and North Korea are examples
Also known as communist/socialist system
Mixed Economy
Ireland - RTE is government owned and Dunnes Stores is privately owned
Incorporates central planning and private enterprise

Important Concepts
Income
Wealth
Welfare
Income
is a flow of wealth

Received regularly for providing a factor of production
Waitress receives an hourly wage for providing labour
Wealth
is the total value of all assets owned by an individual or group of people

It includes intangible and tangible assets
Intangible
= musical talent
Tangible
= a car
Welfare
is the overall condition of well-being of an individual or group of people

Includes material well-being, psychological and moral happiness
Two branches of Economics
Micro Macro
Individual producer and a consumer


Aggregates in an economy
Economic Statements
Factual statements
= positive statements - they have been confirmed/denied by analysis of the facts

Normative statements
= value judgements - they go beyond the facts and state what might happen (opinion)
https://quizlet.com/149110309/test?matching=on&prompt-with=1&limit=10
Scarcity
is another important element of economics
Something is scarce when the demand for it is greater than the supply
If supply exceeds demand then there is a
GLUT
Sometimes Economics is referred to as the
science of scarcity

Economics is all about providing scarce resources in the form of goods and services

It deals with the problem of using scarce resources to produce the best results

Advantages and Disadvantages of Economic Systems


*Handout
Full transcript