Economics is the social science of making choices to efficiently use limited resources to satisfy unlimited wants, driven by the fundamental problem of scarcity.
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um um dear
students uh enrolled in introduction to macroeconomics
macroeconomics
course uh in this lecture we're going to
give uh a brief introduction on
economics uh for those
who didn't take uh the introduction to
microeconomics course in the first
semester and uh it will give you a brief
on what economics is
uh the difference between microeconomics and
and
macroeconomics and the important note is
um the two courses uh the course of
introduction to microeconomics and U the
U the course we're actually uh taking
now the introduction to macroeconomics
are not a um related to each other uh in
a way that uh for those who didn't
actually take the uh introduction to M
microeconomics course I uh that would
not be a big problem for them U now
because um all you need to know is uh
what economics is and the difference
between uh micro and
macroeconomics and uh this will
um yeah this will tell you that that uh
there is no need actually for you to to
have taken the introduction to
microeconomics scores in order to
understand the current one so let's go
through uh the
basic uh concepts of Economics through a road
road
map uh so what is
economics uh economics is a social science
science
uh concerned with efficient use of
limited or scarce
resources uh to achieve maximum
wants so it's a social science means
that it's concerned with human behavior
so we're studying
um persons individuals a
human uh who do some actions and uh we
study those actions now what those
actions are related to is a uh the that
it's concerned with the efficient
efficient means uh reaching the
maximum benefit or uh the maximum my uh
Happ happiness okay the best use of
limited limited here means um a it's
it's not a endless it's not a a
something that a you can't uh you can't
count now limited means that it's a um
it has some a barriers a um like if you
say that uh um you have a um
$10 then that's limited your budget your
income your um uh uh money is is limited
to those $100
$100
okay so that's what we mean by scarce
resources so scarce resources means that
the resources the the um any that is
surrounding us a uh except for air and
water a everything is scarce everything
is limited uh like money for example you
have limited resource limited
income uh you would have limited the
uh uh limited houses limited the uh a um
transportation time for example a um
limited job
jobs Etc so these are scarce means that
there are there is a some number of it
whether it's a few or a lot or a uh a
large number but there is a specific
resource uh so uh economics is concerned
with um the human as it's a social sence
so it's the human behavior the human uh
reaction into having uh limited
resources scarce
resources um to achieve maximum
satisfaction of the material want
want
so um this is what we mean by uh a scarce
scarce
resources a uh means that it's what we
use to a um to satisfy to fulfill to
make us um happy when we a uh get what
we want okay now the distinction is
between wants and
needs so the difference between wants
and needs is that um you may give lists
and lists of your
want um beginning from a um the simple
the simple want to a um simple want of
having a um a um an adequate celery
having a u a nice house a nice car Etc
into um those
uh uh great or uh
I I don't know traveling every day
having a
helicopter yeah that's that's the kind
of wants that everybody would would
would list uh some of you may think of
having a a a new mobile phone a uh a uh
new laptop Etc so these are unlimited
ones you can write um a whole list of of
wants but the problem is that you have
scarce resources you have limited income
limited budget limited amount of money a
uh or other
limitations that would enable you only
to choose between the the wants the the
lists the the number of wants that um
you have just um
gave gave us uh if you want you can you
can write that list of of your wants
wants
um but on the other hand uh when you
think of your um resources your
financial resources your money uh
available with you you would have to
think of prioritizing your wants prioritizing
prioritizing
means um sitting a uh the wants in order
beginning with the most
You by doing that you're you're sitting
your a wants
wants
by your needs so the the on the top of
your wants list you will have your needs
the first need for example for many
people is um
food a uh clothing
shelter housing so you would need um
some food in order to live and to give
you energy and to survive uh you will
need um
clothing um something to wear to cover
you up and uh you will need shelter a
house a place to stay in Okay so so
these are the most
important uh wants which we call now
needs okay so the first thing you would
think of a um
satisfying with your limited resources
are those basic needs your Necessities
Necessities
okay so uh when you are forced to um to
choose choose between the the the wants
that that you have to have when you are
forced to H have them
prioritized in order to choose between
the most
important uh wants uh this is what we
call choice and this is what we're doing
okay so economics is all about choice
um
wants a uh with your limited
resources uh is is is called economics
and what is uh forcing us to choose is
scarcity so scarcity is the main problem
of Economics so without scarcity
wouldn't need to to make any choices if
you have unlimited budget an open budget
to buy anything you want then you
wouldn't be in the situation of having
to choose between different options but
we need to remember that budget is not
the only um problem sometimes um
sometimes time is is the limited resource
resource
um you may be able to to do three things
at the same time uh to travel abroad a
uh to have fun with your friends a uh or
um to enjoy some time by
yourself uh or to go to work for example
so these are some choices that you would
have and you want all of them you would
like to do all of them but you have
limited time you can't do all of them at
the same time so you have to choose
which of those
choices a um that you would want to do
but uh you can't do at the same time so
you need to choose which of those
choices or
options uh that would make you a um a
uh or will give you higher satisfaction
okay will make you more happy happy okay
so for some of us uh they would value
they would like to stay with their
family more than traveling abroad so
that would be that would give them more
happiness more satisfaction than
traveling abroad so they would go with
that choice okay uh so that's what we
call by what what we call a
um a choice okay
um and because time is a scarce uh it's
limited we have limited time in a day or
um in a week or Etc so we need to choose
between the different activities that we
need to do or we want to do a in that limited
time um so the economic perspective is that
that
um what we call a unique way a special
way of thinking about issues that are
considered to be economic so by economic
here we mean um scarcity and choice
which we've just explained how important
it is and a how related choice to
scarcity because as we've mentioned we
don't need to choose if there is no no
scarcity uh the second one is the
rationale Behavior what we mean by
rationale behavior is that you would
always want to maximize
your uh benefit or satisfaction or
happiness so that's what we call
rational we wouldn't expect somebody to
uh to pay more for something that um
that requires a specific price for
example if you wanted to buy um some
bread and it costs only um
$5 why would you pay more for that so
that's the rationale Behavior this this
amount this price is what will give you
the maximum satisfaction of or maximum
happiness of a uh consuming or eating
the this
bread so uh
you would you would pay only that amount
um that's uh the level that will give
you or the price that would give you the highest
highest
satisfaction a
uh so you wouldn't want to pay more for
something that would give you a uh the
same satisfaction or same
okay um let's let's give another example
on that a uh if you want to
reach um a specific place if you want to
go to work for example and you have two
options to go a for transportation to go
by a car uh that would cost you um 10
shakles or to uh to walk to your work
and that would cost you nothing but
we'll give you some a exercises before
reaching work
um so the rationale behavior in this
case is to choose uh reaching work
uh a u by walking or walking to work a
instead of taking the taxi or the car so
that's the rational behavior in this
case because it will give you the same
satisfaction with less Cost Less
Price now what would be the case if you
were late to work now in this case uh
taking the taxi with 10 shakles will
save you uh or save your time because in
this case you will reach work on time
but what would happen if
um if you walked to work and uh it took
you 10 minutes for example or 20 minutes
uh to reach work in this case you will
you will be less happy because you will
have some a uh penalty or punishment
from work by uh maybe uh um yeah it it
could be in in the uh reduction of your
salary or so but uh yeah that's just a
example of some choices that we would be
a um sometimes happy to to go with even
if the cost was higher okay so that's
what we call irrational
Behavior okay what are other issues or
problems of
Economics marginal Thinking by marginal
thinking we're thinking of costs and
benefits a uh what would be the
coast um a uh you know cost of of using
something what would be the cost of a
for example a um
a reading or studying for example a uh
for another hour so that's the margin
margin means one additional unit okay so
what would be the cost of a studying for
one more hour uh the coast could be
um a
uh not staying with your family for an
hour for example or not sleeping for an
hour okay but what would be the
benefit in this case the benefit would
be getting more education learning more
and eventually passing the exams okay so
that's what we we call a marginal
thinking Again by margin we mean one
additional unit a one additional dollar
you're paying for something one
additional a
okay let's see what we have here
here
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