Introduction to Economics What is economics The Economic

Introduction to Economics

What is economics? • The Economic Problem: – How do we satisfy unlimited wants with limited resources? • Models for describing reality.

Maslow’s heirarchy of needs

Resources • Free goods/benefits – Air we breathe – Water in a stream • Scarce/limited resoures – Renewable resources (fish in the sea) – Non-renewable resources (oil) Resources that are needed to produce goods and services are called: Factors of Production

Levels of Economics Micro Consumers vs. producers Allocation of resources Macro Explain the development of the economy: • • Inflation Employment Production Growth

Exercise: EXAMPLES FROM THE NEWSPAPERS/MEDIA

Economic Ideologies and Systems Liberalism Free market economy Social liberalism Tradition Self sufficiency Socialism Mixed economic system Planned economy Hunter-gatherer society Agricultural society Industrial society Modern society

Ideologues Adam Smith • • ”Wealth of nations” 1776 Industrialisation required change. Laissez-faire, the state’s responsibility to protect the free market. Competition is the driving force Karl Marx • • The Communist Manifesto, 1848 A reaction to liberalism and workers’ poor conditions.

Free market or planned economy? Hong-Kong Free Market USA Sweden Russia China Cuba Planned economy

Economic systems: Pros and Cons Free market economy Planned economy + Belief in the capacity of every + Even distribution of individual profit/excess + Competition - / + common ownership - Free choice only benefits a - Lack of information few (those aware of choices) - Queues and black market - Problems with common/public goods - Environmental cost (external effect) Solution: Mixed economic system