1 LECTURE ONE Text book: Economics by Hubbard, R. Glenn, and Anthony Patrick O’Brien Economics. 3rd ed. Pearson Reference book: Economics by Campbell R. McConnell and Stanley L. Brue, McGraw Hill Publication

2 Lecture note is prepared by Sayed Hossain, Instructor for Economics, North Central Texas College, Personal website:

3 What is demand? 1.Willingness to buy a product 2.Ability to pay for the product

4 Who spends in the economy? 1.Consumption by households (C) 2.Investment by business (I) 3.Government spending (G) 4.Net Export (Xn)= Export (X)-Import (M)

5 Define Economics A study of the choices people make to attain their goals, given their scare resources.

6 Microeconomics The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices. Macroeconomics Is the study of the economy as a whole, including topics such as inflation, unemployment and economic growth.

7 Types of Economy Centrally planned economy An economy in which the government decides how economic resources will be allocated. Market economy An economy in which the decision of households and firms interacting in market allocate resources.

8 Mixed Economy An economy in which most economic decisions result from the interaction of buyers and sellers in a market but Government also play significant role in the allocation of resources.

9 Three Questions 1.What goods and services will be produced? 2. How will the goods and services be produced? 3. Who will receive the goods and services produced?

10 Circular flow of income

11 Circular flow of income A household consists of all the individuals in a home. Households are supplying factors of production such as labor, entrepreneural ability and other factors of productions to firms through Factor Market. Firms use these factors of production to make goods and services that they supply to households through Product Market.

12 Circular flow of income Households receive the income from selling the factors of production and purchase goods and services supplied by firms through Product Market.

13 Circular flow of income Households Product Market Firms Factor Markets Labor, capital, natural Resources, entrepreneural ability Goods and services Payment for goods and services Income from selling Wages, other payments Labor, capital, natural Resources, entrepreneural ability Goods and services

14 Production Possibility Frontier

15 Production Possibility Frontier A production possibility frontier is a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology. What is resources? For example: workers, materials, robots, machinery etc

16 Production Possibility Frontier Cotton Soybeans 0

17 Production Possibility Frontier Cotton Soybeans 0

18 Production Possibility Frontier Cotton Soybeans 0

19 Production Possibility Frontier Cotton Soybeans 0

20 Thank you for your patience