ECONOMICS• THE BASIC ECONOMIC PROBLEM

• SOME MORE TERMS

• WHY DO WE STUDY ECONOMICS?

PROBLEM 1: RESOURCES ARE SCARCE.PROBLEM 2: HUMAN WANTS ARE UNLIMITED.

The basic problem of economics is limited resources. Even if human wants or needs are unlimited, resources are limited. It is a challenge to meet up with demands with limited resources.

PROBLEM 3: SCARCE RESOURCES HAVE ALTERNATIVE USE.PROBLEM 4: WE MUST CHOOSE WHICH WANTS TO SATISFY.

To meet up with needs we need to use resources wisely. Therefore it demands for alternative use and choice. Choice must satisfy the important need which might let go other. Therefore one choice could be at the cost of other need. The other foregone choice is called an Opportunity cost. Example: I have a thousand naira. I need a pair shoes and also a pair of trousers. A pair of shoes is for Naira 800 while a pair of trousers for Naira 950. Now depending on urgency one can make a choice. If the choice made is shoes then trousers will be the cost foregone or an opportunity cost and vice a versa.

CHOICE: A CONFLICT OF INTERESTS

• A choice always involves a conflict of interest as everybody cannot be pleased. At this point we are going to read a case study (Extracted from Moynihan & Titlay, 2000).

Case Study:

Anytown conflict: Anytown local council is under pressure from its local taxpayers. This is because Anytown council has £ 10 million remaining of its budget to spend on resources. The local housing estate is in urgent need of repairs and the residents are angry.

One citizen: ‘It is inhuman that we should have to live in such conditions; damp and dirt are everywhere. The council should build some new properties.’

Second citizen: ‘It is intolerable that people like me have been forced to travel such a long way to receive health care. The council should modernize and re-open the old hospital.’

The council faces a choice. It can either build a new housing estae or modernize the old hospital. Each scheme would cost an estimated £ 10 million but whatever choice the council makes, only some of the local people’s wants will be satisfied.

YOUR TASK

Activity 1

• The people living in the north of Anytown and the people living in the estate are locked in disagreement. They both want the council to satisfy their wants, but only one of them can win.

• Choose any one option as your choice and come up with a write-up to convince how best your option is.

Activity 2

• Why is there disagreement or conflict of interest in Anytown?

• To avoid all conflict in Anytown, what is needed?

WHY DO WE STUDY ECONOMICS?

Let us have some critical thinking…….. Why have you chosen to pick economics. Why do we study economics?

1. Allocation of resources: The study of economics allows government and individuals to allocate scarce resources in best way they could benefit.

2. Development of programs: It enables government to come up with programs based on resources that would be beneficial to people.

3. Rational decision: It enables the individuals to choose certain wants among the numerous needs their scarce resources.

4. Preparation of budget: Economics assists government to determine the expected income and expenditure of a country.

5. Solutions to economic problems: Economics also enables individuals, firms and governments to solve their problems using various principles of the subject.

WHY DO WE STUDY ECONOMICS? ….CONTD

6. Production: The study of economics assists us to determine what to produce, when to produce, factors of production and how to produce.

7. Provision of basic tools: The study of economics provides basic tools for analyzing economic problems among individuals, firms, and government.

8. Maximization of profit: It provides traders and businessmen to capitalize on their profits using economic principles in their business.

9. Consumption of commodities: Economics also assists to determine the pattern of consumption of goods and services in our local environment.

10. Satisfaction of wants: The study of economics helps us to utilize the principles of choice, opportunity cost, scale of preference, in order to satisfy human wants.

11. Participation in government: The understanding of economics helps individual to participate.

ASSESSMENT

• Go to the link below and answer the quiz in 30 seconds. Take a print shot of your score and email me.

http://dineshbakshi.com/ib-economics/unit-1-introduction-to-economics/152-interactive-quizzes/1720-introduction-to-economics-multiple-choice-quiz