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Summary ECS1501 NOTES 2021
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Summary of 128 pages for the course ECS 1501 at Unisa (ECS1501 NOTES 2021)
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BRIGHT MINDS SKILLS ACADEMYECS1501 (ECONOMICS)NOTES
THE EASY WAY REVISED EDITION 2021
, Define the term Economics.
❖ Is the study of the use of scarce resources to satisfy unlimited human
wants
❖ It is concerned with the efficient use or management of limited productive
resources to achieve maximum satisfaction of human material wants
❖ Study of how our scarce productive resources are used to satisfy human
wants
Wants Needs Demand
-refer to human desires for -these are necessities -refers to the quantity that
goods and services -wants -essential for survival - consumers are willing and
are unlimited -can be they are not absolutely able to buy at a given price at
individual or group needs unlimited a particular point in time.
E.g. biological,spiritual,law E.g. one can estimate
and order, justice etc the family budget for the
month
Questions economics tries to answer.
❖ For whom?
❖ What to produce? ❖ How to produce?
Opportunity cost
❖ refers to the cost of the alternatives we have to sacrifice
❖ e.g. Tino has to choose between going to school and going to the movies. If
she decides to go to the movies she forgoes the benefits of going to school
so that is the opportunity cost.
❖ We measure opportunity cost of a particular alternative in terms of the best
alternative that has to be sacrificed.
3
,❖ when a choice is made opportunity costs are incurred and Economists
measure costs in terms of opportunity costs
ECONOMIC PROBLEM
❖ scarcity, choice and opportunity cost can be illustrated with the aid of a
Production possibilities curve / production possibilities frontier
❖ the PPC indicates the combinations of any two goods or services that are
attainable when the community ‘s resources are fully and efficiently
employed
Example
❖ Assume an isolated community.
❖ their main goods are fish and potatoes.
❖ the following table shows the production possibilities of the community
Possibility Fish (baskets per day) Potatoes(kilograms per
day)
A 0 100
B 1 95
C 2 85
D 3 70
E 4 40
F 5 0
❖ The above combinations represent the maximum amounts which can be
produced with all the available resources
❖ e.g. if they choose to produce combination E they will be able to produce 4
baskets of fish and 40 kg of potatoes per day.
❖ if they produce 4 baskets of fish they have to forgo the additional 60kg of
potatoes if they had used all their resources to grow potatoes
❖ also in producing 40kg of potatoes they forgo the extra 5thbasket of fish
which they might have produced
❖ so the community has to choose the best combination it prefers.
❖ given the available resources it is impossible to produce more of one good
without decreasing the production of the other good
4
, ❖ the above can be illustrated graphically as follows
The Production Possibilities curve
The Production Possibilities curve
❖ it shows the possible levels of output in an economy with limited
resources and fixed production techniques
❖ the PPC indicates the combinations of any two goods or services that are
attainable when the community’s resources are fully and efficiently
employed
❖ As we move from A to point B through to F the production of fish increases
while production of potatoes decreases.
❖ The opportunity cost of each additional basket of fish therefore increases
as we move along the production possibilities curve.
❖ This is why the curve bulges outwards from the origin ie concave to the
origin
❖ PPC is a useful way of illustrating scarcity, choice and opportunity cost
❖ Scarcity is illustrated by the fact that all points to the right of the curve
e.g. G are unattainable
❖ Choice is illustrated by the need to choose among the available
combinations along that curve
5
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