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Dubai

Economics Classes

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Published in: Economics
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Four Concepts of Economics

Nishat P / Dubai

0 year of teaching experience

Qualification: Master degree. Subject Economics

Teaches: Maths, Islamic

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  1. Four concepts of Economics:
  2. What is Economics? • Adam Smith defined economics as "an inquiry into the nature and causes of the wealth of nations." • "Economics is the study of mankind in the ordinary business of life." - Alfred Marshall. • Lionel Robbins defined economics as. "the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses . Ends" are the wants, which every human being desires to satisfy. "Means" or resources are limites We can simplify the meaning of economics as below: "Managing a household, using the limited money or resources a household has." In short, economics is a social science concerned with the use of scarce resources in an optimum manner and in attainment of desired level of income, output, employment and economic growth.
  3. Four Key Concepts of Economics: 1. Scarcity 2. Supply and Demand 3. Cost and benefits 4. Incentives
  4. Scarcity: • Scarcity is the limited availability of a commodity, which may be in demand in the market or by the commons. For example, this can come in the form of physical goods such as gold, oil, or land — or, it can come in the form of money, labour, and capital. Scarcity also includes an individual's lack of resources to buy commodities. So, scarcity has two factors: the scarcity of our own resources, and that of the resources we want to buy." Scarcity is one of the fundamental issues in economics. Example: The crisis of Covid -19 we had shortage (supply) of disposable Mask and the demand was high, as result the price increases. So people look for alternative sources like cloth mask which is reusable.
  5. Supply and Demand: • Supply and demand is an economic model of price determination in a market. The law of supply and demand is a theory that explains the interaction between the sellers of a resource and the buyers for that resource. Also its indicate the relationship between the price of a given good or product and the willingness of people to either buy or sell it. Generally, as price increases, people are willing to supply more and demand less; and vice versa when the price falls. • The law of demand is if price increase demand will be more and price decrease demand will be less of an economic goods. • The law of supply says that at higher prices, sellers will supply more of an economic good. Because businesses seek to increase revenue, when they expect to receive a higher price for something, they will produce more of it.
  6. Cost and Benefits: • A cost and benefits analysis is the process of comparing the projected or estimated costs and benefits (or opportunities) associated with a project decision to determine whether it makes sense from a business perspective. Cost and benefits both are related to each other. Without cost we never calculate the actual benefits. For Example: Build a new product will cost 100,000 with expected sales of 100,000 per unit (Unit price = 3). The sales of benefits therefore are 300,000. The simple calculation for Cost and benefits analysis for this project 300,000 monetary benefits minus 100,000 cost equals a net benefit of 200,000.
  7. Incentives: • Economic incentives are financial motivations for people to take certain actions or behave in a certain way. There are two types of incentives: Intrinsic incentives are those that 1. Intrinsic Incentives: motivate a person to do something out of their own self interest or desires, without any outside pressure or promised reward. Example: Wanting learn a new language. 2. Extrinsic incentives involve providing a material reward (like money) for accomplishing a task, or threatening some punishment for failure to do so. By definition, all economic incentives are extrinsic motivations. Example: Monetary Bonuses.
  8. prosperous economy higher wages Adam Smith's Econornic Cycle more money to spend on goods and Services or invest in wealth new business

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