SS1 economics lesson note

Lesson note on Economics

SS1

SCHEME OF WORK ECONOMICS SS1

WEEK 1 MEANING OF

ECONOMICS

WEEK 2 ECONOMICS AS A

SCIENCE, ARTS OR SOCIAL SUBJECT

WEEK 3 BASIC CONCEPTS OF

ECONOMICS

WEEK 4 IMPORTANCE OF

OPPORTUNITY COST

WEEK 5 BASIC ECONOMICS

PROBLEMS OF SOCIETY

WEEK 6 BASIC TOOLS OF

ECONOMICS ANALYSIS

WEEK 7 DATA COLLECTION

AND PRESENTATION

WEEK 8 THEORY OF

PRODUCTION

WEEK 9 LAND AS A FACTOR OF

PRODUCTION

WEEK 10 LABOUR AS A FACTOR

OF PRODUCTION

WEEK 11 REVISION

WEEK 12 EXAMINATION

WEEK 1

 THE MEANING AND SCOPE OF

ECONOMICS

MEANING OF ECONOMICS

Economics has very many definitions. There are a variety of modern definitions of economics.

Some of the differences may reflect evolving views of the subject or different views among economists.

Below are some definitions of economics given by some Economists .The earliest definitions

were in terms of wealth or material welfare.

1. Adam smith (1776): He is recognised as “the father of economics for he laid the

foundation of economics as a discipline.

He defined what was then called political economy as “an inquiry into the nature and causes of the wealth of nation”

2. John Stuart Mill (1844): He defined

economics as “the practical science of production and distribution of wealth”.

3. Alfred Marshall (1890): He looked at  as the study of mankind in the ordinary business of life. 

4. J.B Say (1803): Distinguishing the subject from its public – policy uses defines it as the science of production, distribution, and

consumption of wealth.

5. A.C Pigou: According to him, economic is the science of materials welfare. He is interested in consumption which is an aspect of welfare economics.

6. Davenport: He defined economics as the science that treat phenomena from the standpoint of price. He was interested in exchange. 

7. Professor Lionel Robbins (1932): He developed what has been termed the most commonly accepted current definition of the subject.

He defines economics as’ the science which studies human behaviour as a relationship

between ends and scare means which have alternative uses’. 

His definition is analytical, and is the most scientific and most embracing. 

Briefly stated, it shows that:

*Economics is a social science since it studies human behaviour.

*Human wants are unlimited

*There are limited resources with which to satisfy the unlimited wants

*Scarce resources are capable of being put to alternative uses.

THE SCOPE OF ECONOMICS

Despite disagreements over what should be the appropriate definition of economics, economists agree that:

1. Economics is a social science which studies human behaviour or man’s economic activities in relation to production, exchange, distribution and consumption of goods and services. Production deals with creating utility. Production is the creation of wealth in the form of goods and the provision of services which satisfy human wants.

Exchange refers to giving out something in return for another thing.

Distribution in the strict economic sense is a branch of economics which deals with what determines the share of National income received by those who supply factors of production.

Consumption refers to the process of using up resources in order to satisfy human wants and includes eating food, wearing shoes, riding a

bicycle, reading a newspaper etc.

Economics deals with how people react to economics situations, and how they behave while engaged in their daily economics activities.

Economics deals with the administration of scarce resources in society Economics deals with ʻwhat isʾ ʾwhat wasʾ orʻ what will be and not what ought to beʾ.

In other words, Economics is not

normative, but a positive science.

Economics studies the working or

functioning of the economics institution and process such as banks, international economics organisations, etc. and their role.

WHY WE STUDY ECONOMICS

1. A study of economics is necessary since it is primarily concerned with the use of scarce resources to satisfy unlimited want.

2. A study of economics helps the individual to build up a body of economics principles and equips him the tools of understand current issues and problems confront society.

3. Economics assist planners in planning for development

4. Economics helps us to solve the basic economics problems of what to produce, how to produce and for whom to produce.

 5. A study of economics enables the

individual to understand the economic policies of government

6. Economics assist planners in planning for development

7. It assist the producer in the marketing of his productions

8. A study of economics makes the

individual employable

9. Economics assists planners in planning for development.

QUESTION:

1. Define Economics

2. Describe the nature and scope of

economics

3. To economist ,all things are scarce. Discuss.

 ECONOMICS AS A SCIENCE

Economics can be called a science. It has many laws like the physical sciences. The economist observes the behaviour of man while engaged in his daily economics activities. The observations and data collected can then be classified, and form the basis for generalisations and the formulation of economics laws and principles. For example, the first law of demand and supply states that the higher the price the lower the quantity demanded. This is because it has been observed that there is the general tendency for people to buy less if the price rises. The validity

of economics laws can be tested by applying them to real situations.

In trying to formulate economics laws, the economist makes some basic assumptions like the physical scientist, although these assumptions are sometimes unrealistic.

Economics as a science is different from the physical sciences. The physical sciences deal mainly with inanimate matter which can be easily

controlled under laboratory conditions. But economics deals with human behaviour. Human beings have feelings and their behaviour is

unpredictable.

Different individuals may behave in different ways under identical conditions. Unlike the types of

matter dealt with by the physical sciences. Most economics laws are statements of tendencies, that is things that are likely to happen, and their validities depend on certain pre-existing conditions. The law that states the higher the price the lower the quantity demanded may not be universally true. The law may not hold true, for all persons, at all times. The law is based on the basic assumption made in economics that

human beings always behave rationally.

However, economics is not a natural or pure or physical science, but a social science.

QUESTION:

1. Give reasons why Economics is a (a) science and (b) social science

2. What do you consider to be the main weakness of economics as a science be subject ? Account for this .

WEEK 2: BASIC CONCEPTS OF ECONOMICS

The basic concept or elements of economics are: wants, scarcity, scale of preference, choice and opportunity cost.

WANTS : Wants simply means the desire or wish to own goods or services that give satisfaction. Goods

include things such as cars, radios, food, houses, books, etc., (that is tangible commodities), while services incudes hair dressing, the services of an actor, etc(that is intangible commodities). Want s are also called

ENDS.

As these basic needs are satisfied, other needs will arise. That is why we say that human wants are insatiable. This is because human wants are

unlimited while resources used in satisfying them are limited

SCARCITY: Scarcity refers to the limited available resources used in satisfying the unlimited human wants. These resources are scarce relative to their demand. It is as a result of scarcity of resources

that makes the study of economics very essential in order to find alternative uses of these scarce

resources. The available resources cannot satisfy all human wants. Since human wants are unlimited or insatiable relative to the available

resources, we have choose the most pressing ones and leave others that are less important because resources are scare.

As a student you will need to buy school

materials, e.g textbook books worth #1000.00 but

you have only #750.00. it can be seen that the money you have (#750.00), which is your resources, will not be sufficient to buy all you

need. 

The available resources within the environment can never at any time be in abundance to satisfy all human wants. If resources were to be unlimited or abundant, no economics problem would arises and there

would be no need for the study of economics.

Scarcity is the central or basic economic problems

SCALE OF PREFERENCE

Scale of preference refers to a list of unsatisfied wants arranged in order of their relative importance. In other words, it is a list showing the order in

which we want to satisfy our wants arrange in order of priority.

The drawing of scale of preference will make it easier for choice to be made. In order to attain maximum satisfaction with limited resources at

their disposal, an individual, firm and government need to list unsatisfied

wants in order of priority.

Each individual is assumed to have a scale of preference. This is because economics theory assumes that people always behave rationally

and would satisfy their most pressing want first.

A scale of preference may not necessarily be a written list. It could be a mental list. 

For example, Mallam Musa a trader who has only ₦8000 want to buy a pair of shoes, shirt, bag, fan, stove

and table lamp as shown in table.

MALLAM MUSA'S SCALE OF PREFERENCE

ITEM’S NEEDED  PRICE (₦)

SHOE                    3,000.00

SHIRT.                     800.00

BAG                        300.00

FAN                        3,000.00

STOVE                   3, 500.00

TABLE LAMP.         4, 000.00

The table above represents Mallam Musa’s scale of preference, he has carefully arranged all his numerous wants in order of priority.

Since Mallam Musa has ₦8,000.00, he can only

purchase a pair of shoes, shirt, cap and fan.

Because his resources (₦8,000.00) is limited , he has to choose thr first four item which he can afford based on his resources.

IMPORTANCE OF SCALE OF PREFERENCE

1. Ranking of needs

2. Financial prudence

3. Identification of highest priority

4. It helps in making rational choice

5. Efficient utilisation of limited resources

6. Optimum allocation of resources

7. Maximisation of satisfaction

CHOICE

Choice can be defined as a system of selecting or choosing one out of a number of alternatives.

Human wants are numerous and we cannot satisfy all of them because of our limited resources.

We therefore, decide which of the wants we can satisfy first. Choice arises as a result of numerous human wants and the scarcity of the

resources used in satisfying these wants.

OPPORTUNITY COST

Opportunity cost is also known as a real cost or time cost.

The concept of opportunity cost is used in economics to express cost in terms of foregone or sacrificed alternatives. Opportunity cost

means the alternative foregone or sacrifice made in order to satisfy another want. It is the satisfaction of one’s want at the expense of another want.

IMPORTANCE OF OPPORTUNITY COST TO AN

INDIVIDUAL, A FIRM AND A GOVERNMENT

The concept of the opportunity cost underlines the basic economic problems of scarcity and choice, and is relevant to the behaviour of

individuals or consumers, firm or producers and of the government. It is very important concept in the economics.

The concept reveals that every human activities involving an economic decision entails sample

real cost measured in terms of foregone alternatives.

*THE INDIVIDUAL

 individual is faced with the problem of scarcity of resources, and so he has to make a choice. The concept of opportunity cost is therefore relevant to him because;

. It helps him in deciding how to allocate his scarce resources.

. It helps individuals to make decisions.

. It helps an individual to make judicious use of resources.

. It helps an individual to prioritise his wants.

. It helps an individual to make a wise choice. 

*THE PRODUCER OR FIRM

 Producers or firms are faced with scarcity of resources also involved in making choice, so the concept of opportunity cost is relevant to them. .It guides businessman in deciding how best to use the available productive resources. 

. Helps to decide the method of production.

. Helps in project execution.

. Guides policy formulation and implementation. For example if a firm with limited capital resources decides to invest in the production of consumer goods instead of capital goods. The real cost to the firm is the 

production of capital goods which is foregone.

*A GOVERNMENT

The concept of opportunity cost is also relevant to the behaviour of the government. This because the government also has limited

resources at its disposal and so cannot execute all the proposed project at the same time.

.The concept helps the government in deciding how best to use it’s revenue.

.Resources allocation.

. Decision making.

. Preparation of budget.

. Helps in project execution.

ASSIGNMENT

1. Write short notes on (a) wants (b)

scarcity (c) scale of preference (d) choice  opportunity cost

2. What are the importance of opportunity cost to an individual ,a firm and a government?

WEEK 3

BASIC ECONOMIC PROBLEMS OF SOCIETY

In every economic system, what to produce, how to produce, for when to produce and efficiency of the resources used or efficient use of

resources are major problems. These problems are peculiar to every system be it socialism, capitalism or mixed economy.

WHAT TO PRODUCE

Firms, households, and the government are faced with the problem of deciding on the types

of goods and services to produce for society.

This problem arises mainly as a result of the fact that human wants are unlimited relative to the available resources.

It is practically impossible to produce all human wants or needs hence; there is a need for resources allocation in order to meet the

pressing needs of the people

FACTORS WHICH DETERMINE WHAT To PRODUCE

1. Consumers’ need

2. Market demand

3. Consumer Income

4. Cost of production

5. Types of economy

HOW TO PRODUCE

Producers have to decide on the technique of production. The decision to produce importees

determining the resources to be used those to produce these commodities and the production techniques or methods to be used.

Two main methods of production are Labour intensive and capital intensives, can be adopted.

Labour – intensives method implies the use of more labour and little capital while capital intensive method uses more capital like machines and less labour.

FOR WHOM TO PRODUCE

The next basic economic problem is the determination of who will enjoy the goods and services produced.

Irrespective of the type of economic system adopted, goods and services are produced many to satisfy human wants.

EFFICIENCY OF RESOURCE USED

Efficiency of resources used in production refers to the optimum use or combination of factors of production to achieve higher and better output at a reasonable cost.

QUESTIONS

1. Every economic system is faced with

some fundamental economic problems.

Explain this statement

2. What the factors that determine what to

produce ,how to produce , and for whom

to produce ?