``Economics Social science concerned with the efficient use of limited

resourcestoachievemaximumsatisfactionofeconomicwants.(Studyofhow
individualsandsocietiesdealwithscarcity.
Economicssocialsciencestudyinghowindividualsmakechoicesaboutthe
useofresourcesinordertosatisfyneeds.ScarcityrequiresChoice.Economics
isthestudyofhowwemakethosechoices.

What are the Basic Concepts of Economics?

The basic concept or elements of economics are: wants, scale of preference, choice, and
opportunity cost.

1. Wants
Want may be defined as an insatiable desire or need by human beings to own goods or
services that give satisfaction.
The basic needs of man include food, shelter, and clothing. There are many additional
human needs that aren't classified as basic, as well. This includes tangible goods like
houses, cars, furniture, electronics, and so forth. Other needs come form of services, such
as tailoring, carpentry, medical care, and so forth. Human wants and needs are many and
are usually described as insatiable because the means of satisfying them are limited or
scarce.

2. Scarcity
Scarcity is defined as the limited supply of resources that are used for the satisfaction of
unlimited wants. In other words, scarcity is the inability of human beings to provide
themselves with all the things they desire or want.
These resources are scarce relative to their demand. For example, a student will need to buy
school materials such as books worth $100, but she only has $50. Therefore, it can be said
that the money the student has (her resources) will not be sufficient to buy all she needs.
The available resources within the environment can never at any time be in abundance to
satisfy all human wants. Since wants are endless and insatiable relative to the available
resources, human beings have to prioritize. There would be no economic problem if
resources weren't scarce. Hence, economics is sometimes called the study of scarcity.

3. Scale of Preference

Scale of preference is defined as a list of unsatisfied wants, arranged in the order of their
relative importance. In other words, it is a list of our wants arranged by priority.
In the scale of preference, the most pressing wants come first and the least pressing ones
come last. After the first in the list has been satisfied, then there will be room to satisfy the
next want on the list. Therefore, choice arises because human wants are unlimited or
numerous, while the resources for satisfying them are limited or scarce.

4. Choice
Choice can be defined as a system of selecting or choosing one out of a number of
alternatives.
Human wants are many and we cannot satisfy all of them because of our limited resources.
We therefore decide which of the wants we can satisfy first. Choice arises as a result of the
resources used in satisfying these wants. Choice therefore arises as a result of scarcity of
resources. Since it is extremely difficult to produce everything one wants, choice has to be
made by accepting or taking up the most pressing wants for satisfaction based on the
available resources.

5. Opportunity Cost
Opportunity cost is defined as an expression of cost in terms of forgone alternatives. It is the
satisfaction of ones want at the expense of another want. It refers to the wants that are left
unsatisfied in order to satisfy another more pressing need.
Human wants are plentiful, while the means of satisfying them are scarce or limited.
Therefore, we are faced with the issue of choosing one from a whole host of other human
wants. A farmer who has only $20 and wants to buy a cutlass and a hoe may discover that
he cannot get both materials for $20. He would then have to choose which one he has to buy
with the money he has. If he decides to buy a cutlass, it means he has decided to forgo the
hoe. In turn, the hoe is what he has sacrificed in order to own a cutlass. The hoe he has
sacrificed is the forgone alternativethis is what is referred to as opportunity cost.
Opportunity cost should not be confused with money cost. Money cost refers to the total
amount of money that is spent in order to acquire a set of goods and services. For example,
a customer spends $20 in monetary cash to buy a pair of trousers. The $20 spent is the
money cost.

Demand
Law of demand: At higher prices, a lower quantity will be demanded than at lower prices,
other things being equal. Alternatively, at lower prices, a higher quantity will be demanded,
other things being equal.
Reasons why observe law of demand:
Substitution effect: tendency of people to substitute in favor of cheaper commodities
Real-income effect: change in purchasing power that occurs when the price of a good
changes

Resources(or Factors of Production) Are Scarce

Inputs used in the production of goods and services provide by nature or previous
generations that can be used directly or indirectly to satisfy human wants
(Nautral resources) Landoriginal fertility and mineral deposits, topography, climate, water,
and vegetation
(Human Resources) Laborcontributions of humans who work (thinking and doing)
Capitalall manufactured resources including buildings, equipment, machines, and
improvements to land
Classwork:
Define Scarcity
Explain the difference between needs and wants
Explain using an example the concept of Opportunity Cost.

Examples of Opportunity Cost

If you decide not to go to work, the opportunity cost is the lost

wage
Someone gives up going to see a movie to study for a test in
order to get a good grade. The opportunity cost is the cost of the
movie and the enjoyment of seeing it.
You decide to spend $80 on some great shoes and do not pay
your electric bill. The opportunity cost is having the electricity
turned off, having to pay an activation fee and late charges. You
might also have food in the fridge that gets ruined and that would
add to the total cost.
As a consultant, you get $75 an hour. Instead of working one
night, you go to a concert that costs $25 and lasts two hours. The
opportunity cost of the concert is $150 for two hours of work.
Mr. Brown makes $400 an hour as an attorney and is considering
paying someone $1000 to paint his house. If he decides to do it
himself, it will take four hours. His opportunity cost for doing it
himself is the lost wages for four hours, or $1600.

Homework
Timeline of the United States History, since the first settlers until today.
Choose between 7-10 events, the most relevant for you.

The gross domestic product (GDP) is one the primary indicators used to gauge
the health of a country's economy. It represents the total dollar value of all goods
and services produced over a specific time period (1 year) - you can think of it as
the size of the economy.

1. The Specialized market for the buying and selling of old securities like shares, bonds, etc.
is called
a) Market

b) Stock Market

c) Exchange Market

d) Stock Exchange Market

2. The commission a broker receives for the service rendered is called

a) Brokers turn

b) Brokerage

c) Jobbers Turn

d) Interest

3. All of these members of the stock exchange have access to the stock exchange floor
except
a) Unauthorized clerk b) Jobbers

c) Authorized

d) Brokers

4. All of these are importance of stock exchange market except

a) Its an avenue for raising capital

b) It proved employment opportunities

c) It discourages foreign investors

d) it is a market for investment.