ECO 415 CH 1 Intro
ECO 415 CH 1 Intro
ECO 415 CH 1 Intro
1. DEFINITION OF ECONOMICS
2. SCOPE OF MACRO & MICRO
3. BASIC ECONOMICS CONCEPTS
4. BASIC ECONOMIC PROBLEMS
5. ECONOMIC SYSTEM
DEFINITION OF ECONOMICS
• Study of how society chooses to allocate its scarce
resources to the production of g & s in order to satisfy
unlimited wants – Irvin B. Tucker
• Science which studies human behaviour as a relationship
between ends & scarce means which have alternative
uses – L. Robbins
• Study of man in everyday business life – Alfred Marshal
• Social-science study as it deals with human behaviour
in making the decision on how people use scarce
resources in fulfilling their unlimited wants - Economist
DEFINITION OF ECONOMICS
2 problems in economy
a) Productive resources which to produce g & s are
limited
b) Human wants for g & s are unlimited
Conventional Islamic
Eco obj – to reach max Tends to reach the same
o/put with the use of obj as conventional but
scarce resources constrained by the islamic
ethical philosophy
Microeconomics Macroeconomics
Part of economics that Studies the economy as a
studies indv units or whole or deals with the
economic elements in the aggregate
process of DM
Seeks to understand the
ie focus on small big picture rather than the
economic units detailed of indv choice
iv) Entrepreneur
- skill & creative ability of indv to seek profits
by combining resources to produce
innovative products
- a motivated person who seeks π by
undertaking such risky actvt as starting new
bus, creating new product or inventing new
ways of accomplish tasks
BASIC ECONOMIC PROBLEMS
i) What to produce
- know that resources are scarce in relative to human
wants
- economy must choose among diff alternative
combinations of g & s
eg : more good x, less good y
ii) How much & how to produce
- how – choose the best efficient methods
eg : K intensive @ L intensive
- how much – determine the quantities needed by
society at particular time
iii) For whom to produce
- society must have a method to decide who will be rich
& famous ( poor & unknown) – target consumer
PRODN POSSIBILITIES CURVE
• To measure OC
Advantages Disadvantages
Promote competition Failure in provide public good
Satisfaction Monopoly
Advantages Disadvantages
No distribution effect
MIXED
(Capitalist + Socialist)
• Coexistance of the public & private sector
• Can improve income, L forces allocation
• Govt regulation & control of private sector
• Eg : Malaysia
• Characteristics
* free to own wealth but levied with T
* free to make decision but when necessary govt will intervene
* Y is based on effort
ISLAMIC
• Based on Quran & Sunnah
• Concept of Khalifah, Ukhuwwah, Tazkiyah
• Fair competition – balance between private* public ownership
• Emphasize more on moral
• Limited freedom – avoid forbidden actvt
• Need govt intervention ie govt & private work together to
achieve al-Falah
NOTES TO PONDER – CHARACTERISTICS
Capitalist Socialist Mixed Islamic
Ownership of Private Public Both Both
resources
Freedom of Free to trade, I, Central Co-operation Limited – avoid
enterprise organize planning forbidden actvt
Consumers’ Based on
sovereignty consumers’
taste &
preference
Competition Highly Welfare Govt control Motive – to
competitive – income achieve al-falah
profit motive disparity
Govt Limited On certain cases
intervention only