What is economics?

What is Economics?
Lesson objectives: Understand what an economy is Explain the difference between microeconomics and macroeconomics Define the nature of the economic problem Realise that peoples wants for goods and services are unlimited Understand that resources used to make goods and services are scarce Explain why scarcity of resources leads to choice

Recap
Last lesson we looked briefly at the course syllabus. Can you remember the names of the 4 units we will study at iGCSE level?

1) T_____ M_________ S__________ 2) B_____________ E____________ 3) G____________ _________ _______ E___________ 4) I_____________ E_____________

Needs and Wants

1. 2. 3. 4. 5. 6. What needs have the two families have in common? Which family will not be able to satisfy all its needs? What do you think are the wants of the family in picture A? What do you think are the wants of the family in picture B? Why cant the wants of either family be satisfied? What do you think are the main difference between needs and wants?

What do we need and what do we want?

Needs Eggs Wants LCD-TVs Reason Eggs are food televisions bring pleasure but not essential for survival

Needs: the minimum which is necessary for a person to function and survive Wants: desires for the consumption of goods and services

What is an economy?
An economy is an area in which people make, or produce, goods and services. This area can be of any size, with any number of people involved. For example, a village, a city, a country, a school, even a prison! All countries together make up the global economy. Microeconomics focuses on the individual decisions of households and firms. It focuses on the demand and supply within a particular market, such as the market for housing or labour. Macroeconomics analyses the economy as a whole. For example it considers the overall numbers employed in an economy. It deals therefore with topics such as inflation, unemployment, economic growth and international trade.

An economy is made up of lots of individual markets (whiteboard qs)

Can you come up with a definition of a market? Markets are any places where buyers and sellers meet to exchange goods for money. Before money goods were exchanged, this was called barter. Come up with at least 3 problems that barter would create. Why do we have money? Come up with at least 5 different setting for a market. 1 Zara in a shopping mall. 2 Homework task- Make a collage on an A4 page showing at least 10 different markets

Economics is a study of human interactions

Economic issues
Why does it cost30 MYR for 500 grams of prawns in the fishmarket, 50 MYR for 500 grams of prawns in Tesco and 250 rmb for 500 grams of prawns in the Thistle Hotel?

Classifying Resources
Below is a list of of the scarce resources that are used to produce cartons of orange juice. Draw three columns and label them natural resources, human resources and man made resources and categorise them.
Telephones Advertising people Cotton for clothing Fertile soil Squeezing machines Orange pickers Package designers Calculators Water Oil Lorries Printing machines Orange trees Bank clerks Power stations Coal Warehouse workers Lorry drivers Shops Ships crew Factory buildings Insecticide Oranges Roads Accountants Shop assistants Wood

Resources available
Land: this includes the physical land and minerals associated with it, such as oil and diamonds. Labour: this includes the number of people willing and able to work and the skills that they have. Capital: this involves the quantity of capital equipment in an economy, such as machinery and transport. Entrepreneurship: This refers to the ability of managers to think of new ideas, to manage people and to take risks.

The Basic Economic Problem

We face the problem of scarcity and choice: we would like to do and have everything, but because resources are scarce or finite we must make choices

Resources have to allocated between competing uses because wants are infinite whilst resources are scarce

What to produce?

Who to produce for?

How to produce?

The Basic Economic Questions

Key Words
Economics Economy Scarcity Finite

Market
Barter Microeconomics Macroeconomics Needs Wants

Resources
Land Labour Capital Entrepreneurship

Create a mnemonic which reflects the meaning of the word ECONOMICS

E I C C O S N O M

Homework task- Make a collage on an A4 page showing at least 10 different markets