Economics Notes Csec.

Economics is the science that studies how scarce resources are shared
among the various uses that compete for them.
Branches of Economics
Micro-economies is the study of economics at an individual group or

company level.
Macro-economics is the study of economics as a whole, issues that

affect the economy as a whole.
The economy as a system
The economy is a system that creates wealth. Economic systems exist

at a number of levels: we
can refer to the global economy, or to the Caribbean economy, or at a

local level.
An economic system:
*organizes resources for the production of goods and services
*satisfied the wants and needs of people who are part of that system.
The economic system helps society to answer the THREE economic

questions:
1. What goods and services should be produced(consumption)?
2. How are they to be produced and in what quantity(production)?
3. Who should receive the goods(distribution)?

The Nature of Economic
Economic good- a good that is scarce relative to demand for it.
Free good- a good that is in such abundant supply that no sacrifice has
to be made to obtain it.
There is no opportunity cost associated with its use.
The concept of scarcity and choice
Scarcity – means that there is not enough of it to completely satisfy

everyone’s wants.
Choice-opportunity to select from alternative end and between

alternative actions.
Opportunity cost- next best alternative that is given up when a decision

is made.
Factors affecting the economic decision of Economic agents
The following factors influence these economic decisions.
 Income: when income and/ or wealth increases, individuals are able

to spend more. They
can also save more.
 Borrowing: high income earners can afford to borrow more than low
income earners.
They are also likely to save a higher proportion of their income than low
income earners.
When incomes are very low, individuals might have to borrow money
to buy essentials.
 Wealth: in making individual economic decisions, people will consider

the prices of various goods available to them. Richer people will be able
to buy more goods and higher priced goods. Poorer people will often
have to often buy fewer goods and at lower prices.
 Change in the rate of income tax: when tax rates rise, individuals
disposal income falls, and they may cut back their spending as a result.
 Taste: tastes influence individual economic decisions. When tastes

change in favour of goods and services, more is spent on these -
fashionable clothes for example.
Influences on producers in making economic decisions
Producers need to decide what goods to produce and in what

quantities. The decisions they make
are influenced in turn by the buying, spending and saving decisions

made by individuals.
The key influences on producers decisions are:
 The resources available to them
 The budget available to them
 Technical know how

Factors of production
Labour is the human energy and mental skills used to produce

economic goods.For example, bricklayers use not only physical energy
to lift and place bricks, but also their mental powers to decide where to
place the bricks, how much cement to apply and how to tackle unusual
surfaces and unpredictable events.
Skilled and unskilled labour
Economists distinguish between skilled and unskilled labour. Skilled

labour is carried out by individuals who have developed their skills by
practicing and training over time.
A skilled worker can carry out more complicated and valuable tasks
with little or no supervision. An unskilled worker can carry out routine
tasks but may need a lot of supervision when carrying out new tasks.
The productivity of labour
The productivity of labour refers to the out put per worker per unit of
time. For example, Micheal Harrison, a mason, is able to lay 200 bricks
in 4 hours. His productivity is 50 bricks per hour.
The supply of labour
The supply of labour means the quantity that is available at a particular

moment in time. For example, if the government contractor is looking
for labour to construct new government buildings, it will have to try to
recruit from the existing supply of skilled and unskilled labour in the
country.
Division of Labour
The division of labour is the specialistaion occurs when an economic

unit or individual- for example a factory or a factory worker-
concentrates on a particular task. The division of labour is the
specialization of workers on given tasks and work roles.
Capital
Capital items tend to be durable- that is, they last a long time. Another
feature of a capital item us that it is likely to be expensive, eg. a taxi
cab.
The accumulation of capital
Capital is accumulated over time through a process known as

investment.
For example, when Sabina Park became a test cricket ground in the
1930s, most of the spectators would have stood, or sat on mounds
overlooking the ground.
Capital is often acquired by borrowing money to finance a project.
Capital and labor-intensive industries
Some industries are labour intensive. This means that they employ a lot
of labour relative to the amount of capital.
Some industries are capital-intensive. This means that they employ a lot
of capital relative to the amount of labour.
Entrepreneurial Talent
Entrepreneurs are people prepare to take risks to achieve rewards,

mainly in the form of profit. The profit an entrepreneur makes is the
difference between the revenue (money receipts from sales) and the
costs of production(money paid for the use of other factors of
production, for example wages and labour). The total profit that a
business will make for supplying a given quantity of output to the
market is calculated by deducting total costs from total revenue.
Total revenue- Total cost = Total Profit

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Economics is the science that studies how scarce resources are shared

among the various uses that compete for them.

Micro-economies is the study of economics at an individual group or

Macro-economics is the study of economics as a whole, issues that

The economy as a system

The economy is a system that creates wealth. Economic systems exist

can refer to the global economy, or to the Caribbean economy, or at a

*organizes resources for the production of goods and services

The economic system helps society to answer the THREE economic

1. What goods and services should be produced(consumption)?

2. How are they to be produced and in what quantity(production)?

3. Who should receive the goods(distribution)?

Economic good- a good that is scarce relative to demand for it.

There is no opportunity cost associated with its use.

The concept of scarcity and choice

Scarcity – means that there is not enough of it to completely satisfy

Choice-opportunity to select from alternative end and between

Opportunity cost- next best alternative that is given up when a decision

Factors affecting the economic decision of Economic agents

The following factors influence these economic decisions.

 Income: when income and/ or wealth increases, individuals are able

can also save more.

 Wealth: in making individual economic decisions, people will consider

 Taste: tastes influence individual economic decisions. When tastes

Influences on producers in making economic decisions

Producers need to decide what goods to produce and in what

are influenced in turn by the buying, spending and saving decisions

The key influences on producers decisions are:

 The resources available to them

 The budget available to them

 Technical know how

Labour is the human energy and mental skills used to produce

Skilled and unskilled labour

Economists distinguish between skilled and unskilled labour. Skilled

The productivity of labour

The supply of labour means the quantity that is available at a particular

The division of labour is the specialistaion occurs when an economic

The accumulation of capital

Capital is accumulated over time through a process known as

Capital and labor-intensive industries

Entrepreneurs are people prepare to take risks to achieve rewards,

Total revenue- Total cost = Total Profit

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