Michael P.

Vale
Instructor 1
 ECONOMICS

•The study of the production,

distribution, selling and the
use of goods and services

•Key terms:
•Scarce Resources
•Use of Goods and Services
•Unlimited Wants
 SCARCITY

Condition wherein most things

that people want are available
only in limited supply

Ex. 5 books for 1000 students

OPPORTUNITY COST

The cost of choosing to use

resources for one purpose
measured by the sacrifice of
the next best alternatives for
using those resources.
Ex: A father needs to give up
his money for farm expansion
to finance his son’s
education.
COMPARATIVE ADVANTAGE

A person need not to

specialize in everything,
rather be best at what he is
previously good at to be
competitive when compared
with others.
THE ECONOMIC RESOURCES

1. LAND- One factor of

production which include
land used for agricultural
or industrial purposes as
well as natural resources
found above or below the
soil.
Ex: Natural Resources
THE ECONOMIC RESOURCES

2. LABOR- Productive
services embodied in
human physical efforts,
skill and intellectual
powers. It consists of
human time consumed in
production.
Ex: Teaching
THE ECONOMIC RESOURCES

3. CAPITAL- Durable goods

produced in order to
produce other goods. This
consists of machineries,
factories, offices.
Ex: Washing machine for
laundry shop
THE ECONOMIC RESOURCES
4. ENTREPRENEURIAL ABILITY-
Ability of an entrepreneur to
produce the required goods and
services and the deciding power
of businessmen to implement the
right combination of the three
other factors of production.
Ex: Businessman deciding whether to
hire or not additional employee’s.
ECONOMIC SYSTEMS
1. CAPITALISM- Economic
system characterized by
private individuals owning
and operating the majority of
the businesses that produce
goods and services.
TYPES OF ECONOMIC SYSTEMS
2. COMMUNISM- A society in which the
government owns all the nation’s
resources. This is the direct
opposite of Communism. The rights
of capitalism which are private
properties, profits are not allowed.
The central planning government
decides:
• What goods and services to be
produced
• What job suites an individual
TYPES OF ECONOMIC SYSTEMS
3. SOCIALISM- The government owns and
operates the basic industries like
telecommunications, water services,
postal services, banking and selected
manufacturing. Private individuals are
allowed to own and operate small
enterprise.
The government decides:
• What goods and services to be
produced and how to distribute them.
• Those not govt. produced are
distributed by small enterprises.
TYPES OF ECONOMIC SYSTEMS
4. MIXED ECONOMY- Has an
element of more than one
economic systems. It
contains both private and
state owned enterprises.
 DIVISION OF ECONOMICS
1 1. MICROECONOMICS- Concerned with the
behavior and activities of specific
economic units- individual, household,
firms etc. The central concept is the
market.
2. MACROECONOMICS- Concerned with the
behavior of the economy as a whole with
respect to output, income, price level,
foreign trade, unemployment and other
aggregate economic variables.
MARKET
 A place where the producers (sellers)
and the consumers (buyers) meet.
 This is where the producers and
consumers agree on the procurement
of goods and services.
 It is where people (buyer) are left alone
with the businessmen (seller) to make
their transactions.
FORMS OF MARKET
 ORGANIZED
- A form of market where the buyers and
sellers meet at a specific time and place
where an auctioneer helps set prices and
arrange sales.
Ex: Markets for Agricultural commodities
Done only on Wednesdays and Sundays
in Goa
FORMS OF MARKET
 LESS ORGANIZED
- A form of market where the buyers and
sellers do not meet at a specific time and
there is no auctioneer involved.

Ex: Market for Ice Cream scattered anywhere

in Goa/ Ice cream vendor
Can be available anytime
COMPETITION
 An instance when two or more “sellers” offering
same goods or services to “buyers” provide distinct
offers to make sales.

Ex: Prime Supermart and LCC competing with each

other by offering varied choices for grocery
shoppers.
• Prime Supermart’s Grocery items are
affordable
• LCC offers a pa raffle to buyers to compensate
COMPETITION
 Cartel Vs. Collusion

 A cartel is an agreement or cooperation formed

between competitors to control prices. (FORMAL/
*sometimes LEGAL) Ex. OPEC
 Collusion is a secretive agreement between two or
more organizations, formed with the aim of
gaining illegal mutual benefits.
Types Of Market Structure

1.Pure (perfect) Competition- Many products,

many buyers, many sellers
2.Monopoly- One Unique Product, One seller,
many buyers
3.Monopolistic Competition- One unique
product, Many sellers, many buyers
4.Oligopoly- One Unique product, few sellers,
many buyers
Types Of Market Goods
MARKET DEMAND
 Buyers’ willingness and ability to pay a sum of
money for some amount for particular good or
services.

 QUANTITY DEMANDED
 The amount of the good that buyers are
willing to buy
MARKET SUPPLY
 Supply- The quantity of a good or
service which sellers desire to sell at a
given price.
 Quantity Supplied- The amount of a
good that sellers are able and willing to
sell.
 Definition of GDP

The total value of output

of goods and services
produced within an
economy in a given
period of time
 Definition of GNP

The total value of final goods

and services produced during
a given period by the citizens
of a country.
PER CAPITA INCOME
 Average income of a nation
 Expressed in US Dollars
ECONOMIC DEVELOPMENT AND
PROBLEMS
 ECONOMIC BOOM
 Abrupt economic growth
 Total rise in spending
INFLATION
 Sudden rise of price of Goods and Services
 The supply of goods and services become
smaller then demand
 The fall of money’s buying power
RECESSION
 Temporary Economic Decline
 Fall in GDP in two consecutive quarters
DEPRESSION
 A long and severe recession
Thank You…