Lecture # 1

Economics

Notes By Usman ijaz

Recommended Text:

 Lecture Handouts
 Text Books
– Beggtal : Economics (David begg ; Stanley fisher redeger
dornbush)
– Schaum Series : Principles of Economics
– Zaidi, S.A. : Issue In Pakistan’s Economy
 Online Questions
 Slides
 Past papers
 Assignments
Social Sciences

 Do not have the luxury of controlled experiment

 They involve a study of human behavior
Economics as Social Science

 Economic models can be challenged

Two different type of statements:

Positive Statements: These are the statements of facts which can be verified empirically

Normative Statement: value judgments. Should be or Not should be notions

Why we should study economics
 For being well informed and responsible citizen of our country
Defining Economics
 The study of how the people engage in the production, distribution and
consumption of goods and services in a society
 We The People

Household Firms Government

Household
Consumption of goods and services
Unlimited Demand

Firms
Production and supply of good and services

Government
Factors of production

1. Land
2. Labor
3. Capital
4. Entrepreneurship
Land
 Utilizable area in a country

Labor
 Human recourses

Capital
 Any type on machinery that is constructive and can be use in production

Entrepreneurship
 It is a managerial ability that the owner of the firms has to produce the goods and services in an optimal manner
Different Systems

 Dictatorship:
– In this type of economy there is a group of few people the benevolent ones, they
decide what to produce, how to produce, when to produce and for whom to produce

 Command economy:
– Is a planned economy. It is a center government which is responsible fully
for determining the optimal mix of recourses (goods and services) in an
economy.

 Free Market:
– It uses price as rationing the device.
– There is no rule for the government. Market decide what to produce? When
to produce? For whom to produce?
 Classifying Economic Systems

Totally Planned Economy

H
N.Korea China Poland France UK USA Kong

N.Korea China Poland France UK USA H

Kong
Totally Free market economy

Mid 1990s
Circulating Flow of Good & Income

Factors of Production Goods & Services

Firms

Wages
Rent Consumer
Dividends Expedenture
Interests
Etc
(rupess)
(Rupees)

House Holds