Section 1 –

Nature of Economics

Grade 10
Economics
 Objectives

● Define the following terms:

a) Economics
b) Economics as a social science
c) Economy

● Assess the following branches of economics:

a) Microeconomics
b) Macroeconomics

● Identify the following economic agents and explain their roles accordingly:
a) Households
b) Firms
c) Government
Economics , Economics
as a Social Science and
Economy
 Economics
✓ Economics is the study of how society allocates
scarce resources and goods to create wealth.

✓ Economics Is a study of how people create wealth

using scarce resources.
 Economy
The economy is a system / Mechanism of
production, distribution, and consumption of
goods and services that a society uses to
address the problem of scarcity.
Economics as a Social Science
 Micro- Economics
vs Macro-Economics
 The Branches of Economics
Micro-Economics – this is the study of how individual
households and individual firms make decisions and
how they interact in the markets. (Small Scale).

Macro-Economics – this is the study of economy wide

phenomena / the economy on a whole, including
inflation, including unemployment and economic growth.

(Large Scale) In essence it is the branch of economics

that examines the behavior of the whole economy at
once. This focuses on the decisions made by the
government , as well as the issues faced by the
government .
FREE GOODS VS
ECONOMIC
GOODS
✓ Free goods or non - economic goods are those goods
which do not command value in the market, they
are abundant and free gift of nature for e.g., oxygen in
atmosphere, sand in desert and water in river etc.

✓ Contrary to this economic goods are those goods

which command value in the market as they are
scarce goods. Any goods which has a price is scarce
and thus command value in the market.
But remember with change in space and time non-economic
goods becomes economic goods for e.g. oxygen we are
breathing is non-economic goods but for a patient in need of
oxygen cylinder it is an
economic good.

So long as we are living on the bank of river we are using water

as much as we can without paying but the moment we move into
a city and start living there- in we pay water tax which is now an
economic good.
 Type of Goods
Economic Goods Free Goods
• Demand is higher than supply • Are available and abundant in
and availability nature
• Requires human efforts for • Does not require human
production efforts to produce
• Has a money value or price • Has no money value or price
• Can be regarded as wealth in • Cannot be regarded as wealth
economics in economics
• They are not gifts of nature • They are gifts of nature e.g
e.g. table, chair, stationery sunlight, air ,water
 THE ECONOMY
Economics recognizes that resources are scarce.

The economy is the mechanism through which these scarce resources are organized for
the production of goods and services.

These goods and services satisfy the needs and wants of the different groups in the
economy.

The three main Groups/Agents in the economy are households, firms and the
government.
 An Economic System:

❑ Organizes resources for the production of goods and services

❑ Satisfies the wants and needs of people who are part of that system

The economic system helps society to answer the ‘three economic

questions’:

1. What goods and services should be produced (consumption)?

2. How are they to be produced and in what quantities (production)?
3. Who should receive the goods (distribution)?
 1. WHAT TO PRODUCE ?

THREE
ECONOMIC
2. HOW TO PRODUCE ?

QUESTIONS
3. FOR WHOM TO PRODUCE ?
THE MAIN SECTORS / AGENTS IN AN
ECONOMY
Agents/Sectors in the Economy Roles of the Agents

1. Firms 1. They Produce goods and Services

2. They employ a Factor of Production

2.Households 1. Consume Goods and Services

2. They serve as owners of Factors of

Production

3.Government 1.Provide Framework of rules and Laws for

households and firms to operate within.

2. They are involved in Production

The Scope of
Economics
 OBJECTIVES

Assess the concepts of:

• a. Scarcity
• b. Choice
• c. Opportunity cost
• d. Money cost
e. The Production Possibility Curve
 Scarcity and Choice
Mans wants are unlimited. If we were all to write down
all the goods and services we desire , our lists would
be many pages long !

However , economic resources are limited , in that

there are not enough resources to produce all the
goods and services desired .

The imbalance between unlimited wants and limited

resources is the basic economic problem . It is not
possible for each of us to have all the goods and
services we want.
 Scarcity and Choice
• Scarcity is the economic condition where
all resources and goods and services ,
though may be plentiful , are not sufficient
for all those who desire them .

• Choice is the Range of options available to

the individual household , firm or
government when making a decision.
 Scarcity and Choice
• Scarcity is the economic condition where
all resources and goods and services ,
though may be plentiful , are not sufficient
for all those who desire them .

• Choice is the Range of options available to

the individual household , firm or
government when making a decision.
 THE CONCEPT OF OPPORTUNITY
COST
Opportunity Cost is defined as “the next best alternative
forgone”.

As resources are scarce , choices must be made as to

what to produce and consume.

When making a choice , the producer or the consumer

has to do so without – or forgo – some good or service or
course of action .
 THE CONCEPT OF OPPORTUNITY
COST
For. E.g. The householder has to do without the toaster oven , if
he chooses to buy the microwave oven .

The Barbadian Firm will have to give up investing in St. Lucia , if

it chooses to invest in Dominica .

The government might choose to build the school , and not the
hospital
 THE CONCEPT OF MONEY COST

• Economist also deal with another concept called

“Money Cost” . This involves what was actually paid
for the inputs used to produce a given good or
service.

• For instance , a garment factory produces a shirt .

The money cost of the shirt is the actual cost of the
fabric and the labour, among other inputs , used to
produce the shirt.
 OBJECTIVES
Assess the concepts of:

1. The Production Possibility Curve

2. The Points on the Production Possibility Curve - Efficient

, Attainable and Unattainable Points

3. Assess the Factors that causes shifts in the Production

Possibility Curve

4. Identify Scarcity , Opportunity Cost on the Production

Possibility Curve
 PRODUCTION
POSSIBILITY FRONTIER
 Factors that cause the
outward shift in an economy
1. Economic Growth – This simply means that the economy has improved
its productive capacity. Thus, the meaning of economic growth is an
increase in what an economy can produce if it is using all its scarce
resources. An increase in an economy’s productive potential can be shown
by an outward shift in the economy’s production possibility frontier

2. Discovery of New Natural Resources – Countries can discover more

resources ; this will aid their production capacity to increase. E.g. Guyana
discovering oil.
 Factors that cause the
outward shift in an economy
3. Growth in Population – More people means more labour. Growth in a
population can lead to the expansion of the production capacity of a country .

4. Technological Process – Technology , makes people and resources more

efficient . For e.g. , technology aids in getting things done faster , and aids in
Efficiency.

5. Improvements in Labour Productivity – This means that if the people in the

economy become more skilled , educated , trained there will be more
production.
 FACTORS THAT CAUSE THE
INWARD SHIFT IN AN ECONOMY

• 1. No Economic Growth

• 2. Technology Obsolete (Out of Date )

3. No New Natural Resources , due to Natural

Disasters such as hurricanes.
IDENTIFY THE
POINTS OF
SCARCITY AND
OPPURTUNITY
COST
 ACTIVITY COMPUTERS (m) TEXTBOOKS (m)

0 70

1 69

Instruction : Plot the following 2 68

points in your notebook on a 3 65

Production Possibility Frontier. 4 60

5 55

6 48

7 39

8 24

9 0