08-Mar-21

International Political Economy

(IPE)
Dr. Islam Abdelbary
Assistant Professor - Arab Academy for Science and Technology
Senior economic researcher – Plymouth University

1 WHAT IS ECONOMICS?

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Economics
• Economics is the social science that
studies the production, distribution,
and consumption of goods and
services

The science which studies human

behavior 5

Economics
Micro Macro
• studies how • Studies performance,
structure, and behavior
individuals, of a national or regional
households and firms
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economy as a whole.
make decisions to
use limited • study aggregated
resources. indicators such as GDP,
unemployment rates,
and price indices to
understand how the
whole economy works. 6

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what is economics?
• Economics as a subject deals with how people earn
and spend their income to maximize their economic
gains. It is concerned with the study of economic
activities of various individuals and the society.
• Economics deals with economic problems of the
individuals business units, society and that of the
globe.
• An economic problem arises on account of the
following reasons
• 1.Unlimited wants
• 2.Limited resources (scarce)
• 3.Alternative use of resources
• 4.Problem of choices

What Economics Is

Economics is the study of how human

beings coordinate their wants and
desires, given the decision-making
mechanisms, social customs, and political
realities of the society.

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Microeconomics and
Macroeconomics
• Microeconomics studies such things as:
• the pricing policy of firms.
• households decisions on what to buy.
• how markets allocate resources among alternative ends.
• Macroeconomics deals with:
• inflation.
• unemployment.
• economic growth.

Policy Analysis

• Positive economics – the study of what is,

and how the economy works.
• Normative economics – the study of what
the goals of the economy should be.
• Art of economics – the application of the
knowledge learned in positive economics
to achieve the goals determined in
normative economics.

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Economic Theory

• Definitions
• Assumptions- Basically beliefs ( hold true)
• Hypotheses – Prediction (testing-
accepting or rejected)

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If you want something ,

You must lose something else

Opportunity
Scarcity Choose Cost

Choosing something always means NOT choosing something else

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THE FOUNDATION OF ECONOMICS

SOCIETY HAS VIRTUALLY

UNLIMITED WANTS...

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THE FOUNDATION OF ECONOMICS

SOCIETY HAS VIRTUALLY

UNLIMITED WANTS...
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BUT LIMITED OR SCARCE 14

PRODUCTIVE RESOURCES!
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Opportunity cost
• Choosing something always means NOT choosing
something else. For example, if you go to the movies, you must
decide which feature you want to see, which means NOT seeing some
other feature.
• Every choice you make means forgoing some other alternative, or
giving up some other opportunity. So the cost of any choice is the

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other or next best opportunity passed up. In the end, all costs are
opportunity costs.

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• The real cost of something is what you must give up to get it.

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The real cost of something is what you must give up to get it.

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PRODUCTION POSSIBILITIES

A graph that shows the different rates

of production of two goods that an
individual or group can efficiently
produce with limited productive
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resources.

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1- Production possibility frontier

This model helps economists think about the trade-offs every
economy faces. economies can produce different combinations of
goods with the resources they have. This model lets us investigate
the possibilities.

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PRODUCTION POSSIBILITIES

A graph that shows the different rates

of production of two goods that an
individual or group can efficiently
produce with limited productive
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resources.
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PRODUCTION POSSIBILITIES
Assumes...
•Full Employment
• Productive Efficiency

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•Fixed Resources
•Fixed Technology
•Two Goods
for example...
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A Consumer Good Islam AbdelBary

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A Capital Good

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PRODUCTION POSSIBILITIES
What if we could only produce ...
10,000 Robots
or
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400,000 Pizzas
Using all of our resources, to
get some pizza, we must give
up some robots! 24

for example...
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PRODUCTION POSSIBILITIES
in table form
PIZZA 0 1 2 3 4
(in hundred thousands)
ROBOTS 10 9 7 4 0
(in thousands)

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graphical form
(thousands)
Robots

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Pizzas (hundred thousands)

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PRODUCTION POSSIBILITIES
in table form
PIZZA 0 1 2 3 4
(in hundred thousands)
ROBOTS 10 9 7 4 0
(in thousands)
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graphical form
(thousands)
Robots

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Pizzas (hundred thousands)

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PRODUCTION POSSIBILITIES
in table form
PIZZA 0 1 2 3 4
(in hundred thousands)
ROBOTS 10 9 7 4 0
(in thousands)

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graphical form
(thousands)
Robots

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Pizzas (hundred thousands)

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PRODUCTION POSSIBILITIES
in table form
PIZZA 0 1 2 3 4
(in hundred thousands)
ROBOTS 10 9 7 4 0
(in thousands)
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graphical form
(thousands)
Robots

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Pizzas (hundred thousands)

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PRODUCTION POSSIBILITIES
Limited Resources means
a limited output...
At any point in time,

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a full-employment, full-
production economy must
sacrifice some of product X
to obtain more of product Y. 29

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PRODUCTION POSSIBILITIES

Q 14
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12 Impossible point
11 A
Robots (thousands)

B
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9 C W
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7
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D Attainable
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4
Attainable & Efficient
3 but
2 Inefficient
1 E
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1 2 3 4 5 6 7 8 Q
Pizzas (hundred thousands)
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PRODUCTION POSSIBILITIES

Q 14
13 Notes...
12 Unattainable
LAW OF INCREASING
11 A OPPORTUNITY
Robots (thousands)

B COSTS
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9 The amount
C of other
W

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8 products that must be
7 forgone or sacrificed to
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D Attainable
obtain 1 unit of a specific
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product is called the & Efficient
Attainable
4
3 opportunity cost of that
but
2 good.
Inefficient
1 E
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1 2 3 4 5 6 7 8 Q
Pizzas (hundred thousands)
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PRODUCTION POSSIBILITIES

Q 14
13 Notes...Unemployment &
12 Economic Growth
11 Underemployment
Robots (thousands)

10 The ability to produce

9 a largerShown by- Point U
total output
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7 a rightward shift of
6 the production
5 U
possibilities
More of either or
curve
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3 caused by... both is possible
2
1
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1 2 3 4 5 6 7 8 Q
Pizzas (hundred thousands)
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PRODUCTION POSSIBILITIES

Q 14
13 Notes...Unemployment &
12 Economic Growth
11 Underemployment
1 – Increase
Robots (thousands)

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in resource
9 Shown by Point U
supplies

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2 – Better resource
5 U quality More of either or
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3
both is possible
3 – Technological
2 advances
1
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1 2 3 4 5 6 7 8 Q
Pizzas (hundred thousands)
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PRODUCTION POSSIBILITIES

Q 14 A’
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12
B’ Economic Growth
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Robots (thousands)

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C’
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6 D’
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3
2
1 E’
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1 2 3 4 5 6 7 8 Q
Pizzas (hundred thousands)
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Activity 2.1 :
• Activity objective
Better understanding of the principals of economics concepts :
Scarcity – opportunity cost – Trade off – efficiency

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• Steps

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1. Each section, discuss the 4 economic principals then express the
discussion outputs.
2. open the discussion for comments and feedback

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