1. U3A Economics – An Outline of Basic Economic Concepts
The Problem of Scarcity

2. Hunger In Africa

3. Squatters in Djakarta

4. Hunger

5. Polo Players

6. Yachts in the Mediterranean

7. Scarcity
The condition in which human wants are forever greater than the available supply of time ,goods, services and resources

8. Resources which are called Factors of Production
Land- any resource provided by nature.
Labour-The mental and physical capacity of workers to produce goods and services
Capital-The physical plant, machinery and equipment used to produce other goods . Capital goods are human-made goods that do not directly satisfy human wants.
Entrepreneurship-The creative ability of individuals to seek profits by combining resources to produce new or existing products.

9. Financial Capital-which represents the monetary value of a wide range of assets, should not be confused with the economist’s definition of capital, which only encompasses only human made goods used to produce other goods and services.
Entrepreneurship-The creative ability of individuals to seek profits by combining resources to produce new or existing products .

10. Economics- The study of how society chooses to allocate its scarce resources to the production of goods and services in order to satisfy unlimited wants.
Microeconomics-The branch of economics that studies decision- making by a single individual, household, firm or industry.
Macroeconomics-That branch of economics that studies decision- making for the economy as a whole

11. The Methodology of Economics
Identify the problem-e.g. why do motorist buy less fuel in March than February.
Develop a model based on simplified assumptions- the increase in the price of petrol cause the quantity of petrol purchased to decrease during the time period.
Collect Data and Test Model-economist collect data to test hypothesis that a rise in price of petrol will lead to a fall in petrol sales. If the data shows there was a sharp rise in price of fuel in March , then the data is consistent with the hypothesis that a price rise will cause a lowering of consumption in petrol.

12. The Ceteris Paribus Assumption
A Latin phrase that means that while certain variables change,
”all other things remain unchanged”.
A model cannot be tested legitimately unless its ceteris paribus principle is satisfied
For example- in relation to the price of petrol other extraneous factors need to be isolated-increased incomes, holiday time, population increase.

13. Association versus Causation( correlation)
A model is valid only when there is a genuine cause and effect relationship.
Correlation or association of/or between variables does not mean causation. It may well be coincidence .

14. Why do Economists Disagree?
An important reason for differences of opinion lies in the assumptions economists make about human nature. Rational or mainstream economists assume that individuals are motivated almost exclusively by the pleasure/pain/ greed principle i.e. decisions are based on the costs and benefits of a particular action.
Behavioural Economics-A branch of economics in which the outcome of a particular set of circumstances is explained by a more comprehensive set of assumptions about human behaviour e.g. ethical and moral beliefs, social mores and class relationships. It studies the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decision making of individuals and institutions and how those decisions vary from those implied by classical theory. ( ref. Behavioural economics –Wikipedia)

15. Experimental Economics
Is a branch of Behavioural economics in which experiments designed to mimic the real world scenarios are used to explore aspects of human behaviour relevant to economics. Used by governments , firms, charitable bodies and many other organisations to determine policy , product development and attitudes. Together with behavioural economics , experimental economics is being used to investigate how markets fail and explore the effects of anti-competitive market behaviour.

16. ( discuss case study pp14, 15)
Positive Economics- An analysis limited to statements that are verifiable . Statements of Fact that are scientifically testable, to see if they are false or true. Company tax cuts will increase employment and increase wages. Company tax will lead to more buybacks and increase CEO remuneration and increase dividends.
Normative Economics-involve opinions or points of view that are not scientifically testable. They are often based on valued judgements and subjective preferences, e.g. Milk should be dearer than bottled water. Private school education is better than government school education.
( discuss case study pp14, 15)
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