1. Dr. Ahmed El-Feqi
 Ph.D Candidate in Economics.
 Masters In Economics, University of East
Anglia, England.
 B.A in Economics, Alex. University.
 Ford Foundation member, U.S.A.
 International Fellowship Programe, U.S.A.
 Amideast, Cairo member.
 Delta University teaching assistant.

2. E. Napp
Studying Economics will help us in our
daily lives.

3. Chapter 1 Scarcity & Choice
Only I can change my life.
No one can do it for me.

4. What is Economics?
 Economics is the study of how individuals
and societies use their scarce resources to
satisfy their unlimited wants.
 Scarce = limited
 Resources = things used to make other
things (goods & services)

5. What is the difference between a want
and a need?
Wants are items that we desire but are not
necessary for survival.
Needs are something like air, food, or
shelter that are necessary for survival.

6. How do we satisfy our wants and needs?
 We buy goods and services.
What are “Goods”?
 Ex: clothes or shoes
What are “Services” ?
 activities that one person performs for another
such as haircuts or , Doctor, Teacher.

7. Why do we have to make choices about
which goods or services we can buy?
The resources used to make goods and
services are scarce. That makes the goods
and services scarce.

8.  What is the difference between scarcity
and shortage?
 Scarcity means that there is a limited
quantity of resources to meet unlimited
wants and needs.
 Shortage is a situation where a good or a
service is temporarily unavailable.

9. All goods and services are produced
using resources.
 Factors of Production = resources
that are used to make all goods and
services.
 What are the factors of production?
Land, Labor, Capital, Entrepreneurship

10. Resources – Factors of Production
 Natural resources (Land)– “free gifts of nature”
 Land, minerals, oil, forests, air, and timber
 Capital Resources – “manufactured aids to production”
 Tools, machines, equipment, factories
 Human Resources (Labor)– physical and mental talent”
 These are the skills people have that are used to produce goods
and services.
 Entrepreneur – the individual who combines the factors
of production in order to produce a good or service.
 Risk taker, policy maker, and innovator

11. Land

12. Labor

13. Capital

14. L a n d
R e s o u r c e s
( I n p u t s )
L a b o r C a p it a l
G o o d o r S e v ic e
( O u tp u t)
Consumers
buys things
they need or
want.

15. Factors of Production
Model
LAND - cotton
LABOR -seamstress
ENTREPRENEUR –
designer, business owner
CAPITAL – thread, sewing machine.
GOOD – t-shirt

16. Factors of Production
Land Labor Capital Enterprise
Rent Wages Interest Profit
INCOME
Payments
to factors
of
Productio
n

17. What is scarce?
 Everything is scarce because our wants
ALWAYS exceed the limited resources
available.
 Simply put… Economics is:
 Economics=Scarcity
And the definition of Scarcity is
 Scarcity = wants > availability of
resources

18. E. Napp
Scarcity
 To think like an Economist, you must
always remember that scarcity exists.
 You may only have ten dollars in your
pocket but you can certainly think of a
hundred different ways to spend it.

19. E. Napp
So, how do we choose?

20. Basic Economic Terms
Economics The study of how individuals and societies use their scarce resources
to satisfy unlimited needs.
Scarcity Limited; time, money, resources.
Resources Factors of production; land, labor, capital
Land Items found in nature
Labor Work done by people
Capital Tools, equipment, factory, building NOT $
Goods Tangible items of value; computer
Services Intangible items of value; fixing a car
Producer Business who sells goods/services
Consumer People who buys goods/services

21. Limited Resources & Unlimited Wants
Scarcity
Choices
Opportunity Cost
Dr. Ahmed El-Feqi

22. Human wants are unlimited, but resources
are limited.
Scarcity of resources Þ necessity of
choices
Opportunity cost:
is the forgone value of the next best alternative

23. Types of Economics
 Macroeconomics –deals with the economic
decisions of large bodies like the government.
 Theories of Economics
 Countries and their governments
 Trade between countries
 Microeconomics –deals with decisions of
smaller unit like individuals and firms.
 Families = Households
 Firms = Factories

24. Production Possibilities Frontier:
a graph show infinite number of points.
Each point represents a combination of
output for a fixed amount of inputs and
available technology.
More of one good Þ less of another
Illustrates opportunity costs in production

25. TABLE 2-1 Production Possibilities
Open to a Farmer

26. FIGURE 2-1 PPF for Production by
a Single Firm
A Unattainable
Attainable
region
Soybeans
Wheat
E
D
C
B
region
10 20 30 38 52 60 65
40
30
20
10
0

27. Shape: concave
Principle of increasing costs:
­ opportunity cost of producing
another good
Reason: Inputs tend to be specialized.

28. 28

29. Production Possibilities Curve
 Points on the curve : Attainable &
efficient.
 Points inside the curve : attainable and
inefficient or underemployment
 Points outside the curve are
unattainable at present.
 Optimal or best product will some point
on the curve.
Dr. Ahmed El-Feqi

30. Efficiency and the production possibilities
frontier:
Efficiency = no waste.
Every point on a production possibilities
frontier is efficient.
Any point inside the frontier is inefficient.

31. Scarcity & PPC
Points A & B desirable; “best”?
Point C is not possible
Point D is inefficient
To increase production of guns; Must decrease production
of butter.

32. Economic growth = increase in production
of goods and services.
Outward shifts of the curve represent economic
growth.
D production Þ shift of the frontier
Labor Skills
Technology
Capital stock
Land

33. Economic Growth Allows for More
of Everything

34.  “There’s no such thing as a free lunch” 