pb102 microeconomics chapter 1 introduction to economic pkb: julai 2010

PB102PB102MICROECONOMICSMICROECONOMICS

CHAPTER 1INTRODUCTION TO ECONOMIC

PKB: JULAI 2010

Arrow ProcessWhy use graphics from PowerPointing.com?

BASIC ECONOMIC PROBLEMS

-Definitions of economics-Discipline of economics (micro and macroeconomics)

-Capitalisme-Central Planned- Mixed economic -Islamic economic

-Scarcity-Choice-Opportunity cost

What, How much, How to be produced, to whom should be produced

PRODUCTION POSSIBILITIES CURVE (PPC)

WORLD ECONOMIC SYSTEMS

CONCEPT OF ECONOMICS PROBLEM

DEFINITIONS

CHAPTER 1: INTRODUCTION TO ECONOMICS

-Assumption

-Factors that influence the shift of PPC

PB102: MICROECONOMICS

DEFINITION OF ECONOMICSDEFINITION OF ECONOMICS

Economics is a study of how people uses

their limited resources to try to

fulfill unlimited wants and involved alternative or choice

Keywords:Limited resourcesUnlimited wants


MICRO AND MACROMICRO AND MACRO

Discipline of Economics

Microeconomic• Demand

•Supply•Production cost•Market Structure

Macroeconomic•Inflation

•Unemployment•Growth

•Money and Banking

Economic


FACTORS OF PRODUCTIONFACTORS OF PRODUCTION

Labour

Capital


FACTORS OF PRODUCTIONFACTORS OF PRODUCTION

Natural Resources

Entrepreneur


ECONOMICS PROBLEMECONOMICS PROBLEM

Scarcity – wants always exceed

limited resources in order to fulfill human needs



Choices – exists from scarcity. They have

to make a choice from certain alternatives.

or


Opportunity cost – defined as second best alternative that has to forgo for another choice which gives more satisfaction


PRODUCTION POSSIBILITIES PRODUCTION POSSIBILITIES CURVE (PPC)CURVE (PPC)

Various possible combinations of goods and services produced within a specific period with all its resources fully and efficiently employed

Used to explain scarcity, choices and opportunity cost

Keywords:Combinations g&sFull and efficiently resources


ASSUMPTIONSASSUMPTIONS

Only 1 person and 2 products produced (Example: Jane; Cloth and corn)

Operating in full efficiency (full employment, full production capacity)

Amount of resources are fixedFixed technology throughout the

production


PPC CURVEPPC CURVE

Corn

Cloth

•Z - UNATTAINABLE

•X - ATTAINABLE


PPC EXPLAINATIONPPC EXPLAINATION

Points inside the PPC – waste, inefficiency and unemployment

Points outside the PPC – economic concept: scarcity (limited resources and technology)

Points along the PPC – economic concept: choice (make choices among 2 goods)

Movement from one point – economic concept: opportunity cost (having less of one good to get more another)


BASIC ECONOMIC QUESTIONSBASIC ECONOMIC QUESTIONS

What to produce? - type of goods and services

How and how much to produce?- depends on cheapest method - technical efficiency and economic efficiency

For whom to produce?- depends on the distribution of income


ECONOMIC SYSTEMSECONOMIC SYSTEMS

CapitalismSocialismMixed – economyIslamic - economy

CAPITALISM ECONOMYCAPITALISM ECONOMY

Capitalism- known as free-market system, laissez-faire, market economy- without government intervention- decision make by individuals only- Ex: USA, Japan, Germany



Characteristics:- Individual decision making; less government intervention- Price mechanism- Freedom of enterprise and choice- Production objective is more to max profit- Role of self-interest



Merits- Resources are efficiently utilized- Enhances R&D and competition- Incentive to work


Demerits- Inequitable distribution of income- Inflation and high unemployment rate- Human welfares are ignored- Wasteful resources



Solving economic problems- What to produce?

Power of demand and supply- How to produced?

Maximizing output with minimum cost- For whom to produce?

Only for who willing to pays


SOCIALISM ECONOMYSOCIALISM ECONOMY

Known as Central Economy, Communist System, Command Economy or Planned System

Where all the economic decision made by government or central authority

Ex: China, North Korea, Cuba



Characteristic:- Public ownership of resources- Central Authority of Central Economic Planning- Limited use of price mechanism



Merits- Social justice- Better allocation of resources- Good economic growth- Efficiency in production



Demerits- Errors in decision making- Lack of motivation and incentive to work- Lack of development and R&D- Loss of economic freedom- Waste of economic resources



Solving economic problems- What to produce?

More on welfare goods - How to produce?

Production technique chosen based on social welfare- For whom to produce?

All members in society


MIXED ECONOMYMIXED ECONOMY

Combination of capitalism and socialismExample: Malaysia, Singapore, India



Characteristics:- Public and private ownership resources- Price mechanism and economic plan to make economic decision- Government helps to control disparity- Government intervention in the economy



Merits- Efficient allocation of resources- More choices- Co-operation between government and private in making economic decision- Control of monopolies- Economic stability



Demerits- Conflict of interest in producing goods- Negative external influences



Solving economic problems- What to produce

Determined by price mechanismWelfare and private goods

- How to produce?Production methods based on social

benefit and social costs- For whom to produce?

Determined by price mechanism through taxation and subsidy policy


ISLAMIC ECONOMYISLAMIC ECONOMY

Based on Al-Quran and Al-HadithEconomic decision more on maslahahEmphasizes happiness on earth and

afterlife



Merits- Ensures social welfare - Avoid riba and monopolies- Equal distribution of wealth and income - Freedom of ownership resources



Solving economic problems- What to produce

Free to produce subject to Islamic laws- How to produce?

Maximize production and minimize cost- For whom to produce?

Based on purchasing power and individual income


pb102 microeconomics chapter 1 introduction to economic pkb: julai 2010

Documents

ppc economic concept

economic efficiencyfor

point economic concept

scarcity limited resources

resources pb102

ppc waste

choice production objective

combinations gsfull