Welcome to

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Welcome to

• Economics

Powerpoint produced by Rachel Farrell (PDST)
Aoife Healion (SHS, Tullamore)
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Science

• Is knowledge gained by
• observation and experiment
• that is repeated and tested

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Social Science

• Is the study of human behaviour

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Aims

• Are the goods and services that people require
  from an economy.
• They are divided into needs and wants.

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Needs

• Are essentials required for survival.
• Basic needs.
• Food, shelter, clothing.

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Wants

• Are anything in excess of our needs.
• Things we can live without.
• TV, holidays, i-pod

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Scarce Resources

• AKA
• The factors of production.
• Land
• Labour
• Capital
• Enterprise

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What is economics?

• Economics is a social science
• which studies human behaviour
• in relation to peoples aims
• and the scarce resources available to them
• to achieve these aims,
• knowing that the resources have
• alternative uses.

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The Factors of Production

• Are those scarce resources which we use to
  produce wealth.

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4 Factors of Production

• Land
• Labour
• Capital
• Enterprise

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Land

• All things supplied by nature which helps to
  create wealth.
• It is fixed in supply.
• Eg. fields, water, natural gas, oil, coal,
  minerals, trees..
• The payment/reward for land is rent.

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Labour

• Any human effort which helps to create wealth.
• Eg. employees, builders, carpenters, factory
  workers..
• The reward for labour is wages.

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Capital

• All man-made things that are used to create
  wealth.
• Eg.buildings, machinery, computers, tractors..
• The reward for capital investment is interest.

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Enterprise

• The human activity that brings together the 4
  factors of production to take the initiative and
  risk to set up a new business.
• Eg. Bill Gates, Richard Branson
• The reward for enterprise is profit.
• The risk of enterprise is loss.

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Example Bread
Land Wheat
Labour Farmer, baker
Capital Tractor, oven, bakery
Enterprise Cuisine de France
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Opportunity Cost

• Factors of production are scarce.
• They have alternative uses.
• Therefore we must make choices when deciding what
  to produce or purchase.
• (2005 SQ 1)

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Opportunity Cost (continued)

• The opportunity cost is the sacrifice of the item
  you must do without when you have to make a
  choice between two items you want to produce or
  purchase.
• (2005 SQ 1)

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Opportunity Cost (continued)

• Example
• I have 2.00.
• I can buy ice-cream or pringles.
• I choose ice-cream.
• Financial cost 2.00
• Opportunity cost pringles.

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2007 SQ 7

• An Irish banking group own thirty branch offices.
  There is no opportunity cost to the banking
  group using these offices as they are fully
  owned.
• True/False

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Answer

• False
• The branch offices could be sold and the money
  invested.
• An income could be earned from renting the branch
  offices.

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Externalities

• Are the unintended side effects of a calculated
  decision to do something.
• Bad Factory pollution, noise, traffic.
• Good Money from rates used to build sports hall

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Wealth

• Is a stock of goods and services which have been
  accumulated.
• Eg. cars, houses, computers..
• Note See interactive resources

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Income

• Is a flow of goods and services.
• It is possible to have a high standard of living
  and to spend all your earnings on disposable
  goods and have no wealth left to show for that
  spending.

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Our Welfare

• Comprises of having a combination of good
• Income
• Wealth
• Health
• Happiness
• Living conditions

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The Aims of Economics

• To achieve efficient use of resources
• To use the factors of production in such a way as
  to satisfy as many of the needs and wants of
  society as possible.
• Eg. recycling, efficient cars

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• 2. To achieve an equitable distribution of wealth
• Rewarding people in relation to the contribution
  they make to the economy.
• Providing income for people unable to work.

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• 3. To create stability in an economy
• To attempt to avoid the cycle of booms (huge
  economic growth) and slumps (recessions) in the
  performance of an economy.

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Microeconomics

• Deals with individual units and the interaction
  between them.
• Eg. consumer, household, firm.
• It deals with supply and demand.
• It shows how many goods will be produced and
  consumed at a given market price.

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Macroeconomics

• Is the study of the entire economy in broad
  terms.
• Eg. the total income in the economy,
• the total level of employment,
• the total amount of production.

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Open Economy

• Trades with other countries.
• Eg. Ireland.

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Closed Economy

• Does not trade with other countries.

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A Free Good

• Is a good that is plentiful in supply.
• Eg. Air, water.
• But their status may change due to
• pollution, drought

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An Economic Good

• Is a good that demands a price.
• It must give some satisfaction when consumed.
• It must be transferable from one person to
  another.
• Students Write a brief
• Explanation of each point eg.

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A Capital Good

• Is a good not wanted for itself.
• But for the contribution it makes produce goods
  and services.

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An Economic Model

• Is a simplified representation of the real world.

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Ceteris Paribus

• Is the assumption that no other factor which
  influences the topic we are talking about changes
  at that time.
• i.e. All things being equal.
• Eg. If price increases
• demand falls,
• assuming that incomes did not rise.

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The laws of economics are dynamic

• Because
• They are not statement of fact.
• They are a statement that under certain economic
  conditions, certain people will act in a certain
  way.

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• Economic laws may become obsolete due to
• Changing human behaviour.
• Changing economic conditions.

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Positive Economics

• Is a neutral science.
• It states what is.
• It does not give value judgements.
• Eg. The government needs to increase spending.
  (leaves it to gov to decide on what)

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Normative Economics

• Is based on value judgements.
• Eg. The government should spend more money on
  education as this is best for the nations future.

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Deductive Reasoning(abstract)

• Going from general to particular.
• Drawing conclusions from generally held
  principles.
• Eg. If prices of goods fall demand increases,
• therefore if the price of Daz falls more
  
• of it will be demanded.

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Inductive Reasoning(empirical)

• Going from particular to general.
• Drawing conclusions from observing known facts of
  many many particular situations.

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• Eg.
• A study found that demand fell in 1,000
  individual shops when prices were increased.
• Therefore we can conclude that when prices rise,
  demand falls. (ceteris paribus)