Introduction to Economics: Economics in Human Life

1.

Unit 11.1A
Introduction to economics:
LO: Economics in human life

2. Who Is It?

□
□
Write down something about yourselves
you think no one knows.
One reads the slips of paper and others
guess who the person is.

3. LONG TERM PLAN

4. TERM 1 OUTLINE

Unit 11.1A
Introduction to economics:
• Economics in human life
• Limitation of resources and endless needs
• Production possibility frontier
Unit 11.1B
Supply and demand:
• Law of supply and demand
• Elasticity of supply and demand

5. Discuss (P/G) (5 minutes)

What economic issues do
you have to solve
(or your parents)
in your daily life?

6. Activity 1 (5-7 minutes)

What is economics really about?

7. Watch the video and discuss

https://www.youtube.com/watch?v=
_7a8gV86wGo&t=63s

8. ECONOMICS

Economics is the social science that
studies the choices that individuals,
businesses, governments and entire
societies make as they cope with scarcity
and the incentives that influence and
reconcile those choices.

9. Economics is divided into two parts.

Microeconomics and Macroeconomics

10.

Microeconomics is the study of choices
that individuals and businesses make, the
way those choices interact in markets and
the influence of governments.
Macroeconomics is the study of the
performance of the national and global
economies.

11. Microeconomics or Macroeconomics.

Activity 2: Classify the economic concepts
Microeconomics or Macroeconomics.
•Inflation
•Demand for smartphones
•Unemployment rate
•Price of coffee
•GDP
•A firm's production costs
•Economic growth
•Consumer choice
•National income
•Market competition
•Interest rates
•Government budget deficit
•Price of a house
•Business profit
•Exchange rate
•Supply of oil
•Poverty
•Wages in one company
•National debt
•Consumer spending
•Monopoly
•Production of a country
•Price elasticity of demand
•Fiscal policy
•Firm's decision to hire workers
•Balance of payments
•Individual consumer behaviour
•Unemployment

12. Answer keys:

Microeconomics
Macroeconomics
Demand for smartphones
Inflation
Price of coffee
Unemployment rate
A firm's production costs
GDP
Consumer choice
Economic growth
Market competition
National income
Price of a house
Interest rates
Business profit
Government budget deficit
Supply of oil
Exchange rate
Wages in one company
Poverty
Monopoly
Consumer spending
Price elasticity of demand
National debt
Firm's decision to hire workers
Production of a country
Individual consumer behaviour
Fiscal policy
Balance of payments
Unemployment

13. Big Economic Questions

□ What, How and For Whom?
□ Goods and services are the objects
that people value and produce to satisfy
human wants.
□ What? What goods and services do we
produce?
□ What we produce changes over time as
changes in technology allow us to
produce more.

14. Types of goods (group work)

□ Consumer and capital goods
□ Final goods and intermediate goods
□ Private goods and public goods
□ Economic goods and free goods

15. Consumer and capital goods.

□ Consumer goods are goods that are
used or consumed by individuals or
households (e.g food, wine, clothes
etc)
□ Capital goods are goods that are not
consumed in this way, but are used in
the production of other goods (e.g,
machinery and plant).

16. Final goods and Intermediate goods

□ Final goods are goods that are used
or consumed by individuals,
households and firms. A loaf of bread,
for example is a final good.
□ Intermediate goods are goods that
are purchased to be used as inputs in
producing other goods. E.g flour used
by bakers is an intermediate good.

17. A private good

□ A private good is a good that is
consumed by individuals or
households. All typical consumer
goods (food, clothes, furniture) are
private goods. A distinguishing
feature of a private good is that
consumption by others can be
excluded.

18. Public good

□ A public good, on the other hand is
a good that is used by the community
society at large. Consumption by
individuals cannot be excluded. A
traffic light for example is a public
good.

19. An economic good

□ An economic good is a good that is
produced at a cost from scarce
resources. Economic goods are
therefore also called scarce goods.
Naturally, most goods are economic
goods

20. Free good

□ A free good is a good that is not
scarce and therefore has no price.
Air, sunshine and sea water at the
coast are usually regarded as free
goods. However, because of pollution
clean air is also becoming scarce.

21. Key concepts:

□ Consumer goods → goods used directly by consumers.
□ Capital goods → goods used to produce other goods and
services.
□ Final goods → goods ready for final use and not used for
further production.
□ Intermediate goods → goods used as inputs in producing
other goods/services.
□ Private goods → goods that are excludable and rival in
consumption.
□ Public goods → goods that are generally non-excludable and
non-rival.
□ Economic goods → scarce goods that have an opportunity
cost.
□ Free goods → goods available without scarcity or an economic
cost, such as sunlight or air in ordinary circumstances.

22. Activity 3: Place each item in the most appropriate category in the table

Car for a family • Factory machinery • Bread bought by a household
Flour used by a bakery • Public park • Laptop used by a company • Fresh
air • National defence • Bottled water • Steel used to produce cars • School
building • Free sunlight • Smartphone bought by a consumer • Delivery
truck • Restaurant meal • Electricity used by a factory • Clean drinking
water in nature • Street lighting • Office computer • Wood used to make
furniture

23. Answer keys:

Type of Goods
Correct examples
Consumer goods
Car for a family; Bread bought by a household;
Smartphone bought by a consumer;
Restaurant meal; Bottled water
Capital goods
Factory machinery; Laptop used by a
company; Delivery truck; School building;
Office computer
Final goods
Car for a family; Bread bought by a household;
Smartphone bought by a consumer;
Restaurant meal; Bottled water
Intermediate goods
Flour used by a bakery; Steel used to produce
cars; Electricity used by a factory; Wood used
to make furniture
Private goods
Car for a family; Smartphone bought by a
consumer; Bottled water; Restaurant meal;
Office computer
Public goods
National defence; Public park; Street lighting
Economic goods
Car for a family; Factory machinery; Bottled
water; Smartphone; Electricity; Steel; Wood
Free goods
Fresh air; Free sunlight; Clean drinking water in
nature*

24. Positive economics & Normative economics

Positive economics & Normative economics
standard branches of modern economics.

25.

Positive economics describes and explains
various economic phenomena
while
Normative economics focuses on the value
of economic fairness or what the economy
should be.

26. Positive vs Normative Economics

□ Positive Economics explains cause
and effect relationship between
variables.
□ The statement “decreasing the
interest rate will increase the
investments” is an example of a
positive economic statement

27. Normative Economics

□ Normative Economics is related value
conclusions and can be defined as an
opinion, estimation or a point of view.
□ In other words, it reflects the
opinions and theoretical situations
than actual facts. We all can suggest
ideas, opinions for any issue or
problematic situation

28.

29. Is Positive Economics Better Than Normative Economics?

Both types have their place, and on their own both also have flaws.
Integrating positive and normative economic statements together is often required in order to create
the policies of a country, region, industrial sector, institution, or business.

30. Indicate if the statement represents Positive or Normative economics

1. Government-funded healthcare surges public expenditures.
2. The government should make available fundamental healthcare to every citizen.
3. Monopolies have proved to be inefficient
4. The relationship between wealth and demand is inverse in the case of inferior goods
5. House prices reduce once the interest rate on loans get higher
6. The government should implement strict wealth tax laws to decrease the uneven distribution of
wealth.
7. The desired rate of return on gambling stocks are higher compared to others
8. No individuals should be entitled to inheritances as it belongs to society
9. Import duties should be increased on goods coming from nations with humble human rights record
10. Car scrappage schemes can result in a fall in the prices of second-hand cars
11. Investors ought to be more socially responsible and stop investing in vice stocks
12. Developing countries should only accept democracy when their entire population is educated and
liberated

31.

Statement
Type
Why?
Makes a factual, testable claim about
government spending.
1
Government-funded healthcare surges public expenditures. Positive
2
The government should make available fundamental
healthcare to every citizen.
Normative
Uses “should” and expresses a policy
preference.
3
Monopolies have proved to be inefficient.
Positive
Makes a claim that can be investigated using
economic evidence.
4
The relationship between wealth and demand is inverse in
Positive
the case of inferior goods.
Describes an economic relationship that can be
tested.
5
House prices reduce once the interest rate on loans gets
higher.
Positive
Describes a cause-and-effect relationship that
can be tested using data.
6
The government should implement strict wealth tax laws
to decrease the uneven distribution of wealth.
Normative
Recommends what the government ought to do.
7
8
The desired rate of return on gambling stocks is higher
compared to others.
No individuals should be entitled to inheritances as it
belongs to society.
Positive
Normative
Makes a factual claim about investment
returns/risk that can be tested.
Expresses a value judgment about what people
should be entitled to.
9
Import duties should be increased on goods coming from
nations with poor human rights records.
Normative
Recommends a government policy based on a
value judgment.
10
Car scrappage schemes can result in a fall in the prices of
second-hand cars.
Positive
Describes a possible economic effect that can
be tested.
11
Investors ought to be more socially responsible and stop
investing in vice stocks.
Normative
“Ought to” indicates a recommendation/value
judgment.
12
Developing countries should only accept democracy when
Normative
their entire population is educated and liberated.
Makes a judgment about what developing
countries should do.

32. ACTIVITY: POSITIVE Vs NORMATIVE ECONOMICS (group work)

What does it mean?
Can the results be verified?
Can the results be applied in real life?
What is the scope of the result? Is it subjective or
objective?
What is the approach to the problem?
Provide one example of positive or normative
statement.

33.

The easiest way to distinguish them is:
•Positive economics = describes or explains what is / what happens; it
can be tested with evidence.
•Normative economics = expresses what should be / what ought to be; it
involves value judgments.

34. What are Economic Agents?

Economic Agent -
an economic
decision maker who can recognise
that different factors influence and
motivate different economic groups.

35. Types of economic agents.

□ Consumers
□ Firms (Producers)
□ Governments

36. CONSUMER AND FIRM

□ Consumer – One who consumes a
produced good or service, generally
by financial purpose.
These are
general
high
street
shoppers,
stockbroker’s etc.™
□ Firm – Economic agents whose role is
to transform factors of production
into goods and services to sell.
They can be public/private/voluntary.

37. Government

Government – An economic agent which
provides rules for how firms and
consumers should interact. This is
evident in developed economies. An economy
with higher levels of income has better service
sectors.

38. INTERACTIONS OF AGENTS

39. Formative assessment

□ What is Positive Economics?
□ What Normative Economics?
□ What is the difference between
Positive and Normative Economics?
□ Who are the main economic agents?
What are their roles?

40. Natural science and Social science

What does it study?
The way of studying?
Examples

41. NATURAL SCIENCES VS SOCIAL SCIENCES

□ Natural Sciences is a branch of
science
concerned
with
the
description,
prediction,
and
understanding
of
natural
phenomena, based on observational
and empirical evidence
□ For example, the study of plant
life; creation of biomass;
development of different lights
etc.

42. SOCIAL SCIENCE

□ Social science is a major category of
academic disciplines, concerned with
society and the relationships among
individuals within a society. It in turn
has many branches, each of which is
considered a "social science. For
example, studying economics,
political sciences, psycology, etc.

43. Reflection

What did you learn?
□ What was easy?
□ What was difficult?
□