ECONOMICS FOR SOUTH AFRICAN STUDENTS

CHAPTER 1:

WHAT IS ECONOMICS?

ECON-1

THE ECONOMY VS.

Studying Economics

HOW WOULD YOU DESCRIBE THE STUDY OF ECONOMICS?

NeedsResources

Scarcity

Choice

Opportunity cost

ECONOMISTS LIKE GRAPHSScarcity, choice and opportunity cost can be illustrated with the production possibilities frontier.

• What is the production possibilities frontier?• The example of the production of fish and potatoes...

Option Fish (baskets per day)

Potatoes (kg per day)

A 0 100

B 1 95

C 2 85

D 3 70

E 4 40

F 5 0

FIGURE 1-1Option Fish

(baskets per day)

Potatoes (kg per day)

A 0 100

B 1 95

C 2 85

D 3 70

E 4 40

F 5 0

FIGURE 1-1

Cannot be produced with available resources

Society has to choose:

C = 2 baskets fish and 85kg potatoes

D = 3 baskets fish and 70 kg potatoes

What is the opportunity cost of

One more basket of fish?

THE SCIENCE OF ECONOMICS

Social science...• There are laws – it is differs from the natural sciences• LAW of DEMAND!

• What is demand again?• Ceteris paribus

2 HOOFDELE VAN DIE STUDIE VAN EKONOMIE

Economics

MACROThe economy

as a whole

MICROIndividual

participants