What is Economics?
Economics can be defined as the Social Science
concerned with the Problem of administering or using
Scarce Resources so as to attain the greatest or
maximum fulfillment of society’s Unlimited Wants.
Factors of Production
Natural Resources: land, minerals,
water, forests, etc.;
Labor: both physical and mental;
Physical Capital: machines, tools,
buildings, trucks, etc.;
Human Capital: knowledge, education;
know how; and
Entrepreneurship: the ability to organize
a production process and take risks.
Production Possibilities
Frontiers (PPF)
PPF shows all the combinations of two goods that the
full-employment use of a society’s resources can
produce in a period of time (using the best available
technology).
Production
Possibilities
FOOD
MACHINES
A
B
C
D
E
F
15
14
12
9
5
0
0
1
2
3
4
5
Food
A
B
C
D
E
PPF
F
0
Machines
Decision Makers
Households: the principal owners of
factors of production;
Business Firms: the principal users of
factors of production; and
Central Authorities: the federal, state,
and local governments and their
agencies.
Types of Economic Problems
What goods and services are being produced
and in what quantities?
By what methods are goods and services
produced?
How is the supply of goods and services
allocated among the members of the society?
Are the society’s resources being fully
employed, or are some lying idle?
Is purchasing power being eroded by inflation?
Is the economy’s capacity to produce goods
and services growing over time?
0
