ECONOMICS ISSUES PART I

       On the first week ( Wednesday . 20^th January 2016), we’ve learn about the Economics Issues which is not a very common subject for us. From learning session with Sir Amir about 2 hours, we got so much input about economy. So, this is what we got from that session.

MICROECONOMICS – Study of small economic units namely action by the Firm and Household.

MACROECONOMICS – Research about the whole of economy issue in the country included the inflation, unemployment, economy growth and so on.

                                                               

                                                     Positive vs Normative Economics statement

Basic Economy Concept

v  Scarcity

§  We do not have enough resources ( lack of resources ) to produce everything we want because the factor of production are limited on the same time the amount of output that can be produce also limited .

v  Choice

§  Because of the resources are limited, we should choose the rational decision to satisfy unlimited human want. A choice has to be made among several wants which involves some trade off known as opportunity cost.

v  Opportunity Cost

§  It is defined as the value of the second best alternative foregone when a choice is made

Basic Economy problems

v  What to produce

-Concerned with that goods and services will be produces.

-This is because of the limited factor of production but the demand are unlimited

- So, the firms will produces goods based on demand that will give maximum utility to people

v  How much to produces

Ø  Decide how many quantity of the product should be produces

Ø  So it must be based on total demand for the goods

v  How to produces

Ø  Usually the firm will make decision either use the labour intensive or capital intensive.

Ø  The intensive must be decreasing the production cost.

v  For whom to produces

Ø  This is the target market to sell the product

Ø  The producer decides to distribute the goods and services to society

Ø  It is also based on income of the society

ØUsually, people with high income are able to consume more goods or services that people with low income.

Factor of production

Production possibilities curve (PPC)

Ø  Show the maximum combination on goods that can be produced given the available factors of production and the available technology of production.

Ø  Purpose

·         To understand the concept of scarcity and constrained choice

·         To emphasize the distinction between movements along a PPC nd shifts the PPC

·         To show the concept of opportunity cost usin the PPC model

Ø  3 Assumptions to build the PPC

·         Only two goods will be produce

·         The production of technology is available and not changes

·         Limited factor of production

·         Economy has achieved level of full employmen

·         Example of the production possibilities curve