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HKCEE Microeconomics

HKCEE Microeconomics. Chapter 1: The Nature of of Economics. What is Economics?. The study of how men allocate l _________ resources to satisfy their u _____________ wants. W hat is Economics?. Want and Demand. Want: A desire A particular want can be perfectly satisfied Demand:

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HKCEE Microeconomics

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  1. HKCEE Microeconomics Chapter 1: The Nature of of Economics CH1-The Nature of Economics

  2. What is Economics? The study of how men allocate l_________ resources to satisfy their u_____________ wants. CH1-The Nature of Economics

  3. What is Economics? CH1-The Nature of Economics

  4. Want and Demand Want: A desire A particular want can be perfectly satisfied Demand: Want + p_________________ power CH1-The Nature of Economics

  5. Want or Demand? A want A demand CH1-The Nature of Economics

  6. Unlimited wants Limited resources scarcity choice Opportunity cost (OC) Scarcity and Opportunity Cost CH1-The Nature of Economics

  7. Remarks on Scarcity Scarcity is a r______________ concept Scarcity exists when limited resourcesare insufficient to satisfy all unlimited wants Scarcity is simply a condition that we want more than we have Scarcity is a universal problem Scarcity can be reduced but not be eliminated CH1-The Nature of Economics

  8. Is Sea Water Scarce? No! Because we do NOT want more than we have. Exercise 1: TB/P.3/MCQ 1 Exercise 2: TB/P.4/Q 1.1 Exercise 3: TB/P.5/MCQ 2 CH1-The Nature of Economics

  9. Opportunity Cost (OC) OC is the h_____________ valued (or best) option f_____________ We choose the highest valued/best option and forgo the second best option, which becomes our OC in a making decision Exercise 4: TB/P.7/MCQ 3 CH1-The Nature of Economics

  10. Opportunity Cost (OC) What is OC for Dorothy to choose the doll? ALL? CH1-The Nature of Economics

  11. Opportunity Cost (OC) Full cost = out-of-pocket cost + income forgone = explicit cost + implicit cost Closer Look: TB/P.9/1.4 CH1-The Nature of Economics

  12. Case Study The Case Explanation Consolidation Exercise (M.C) CH1-The Nature of Economics

  13. Case Study • Romeo & Juliet: A Dilemma CH1-The Nature of Economics

  14. 我是陳大文，行年廿九歲 ，尚未取妻。由於我是一 間上市公司的主席，所以 根本沒有時間結識女朋友 。我阿媽就好心急，成日 想我早Ｄ結婚。 . . CH1-The Nature of Economics

  15. 我已經幫你安排了 三個女仔同你相睇 。你快Ｄ睇下鍾意 邊個．．． 阿媽好想抱個孫仔 CH1-The Nature of Economics

  16. CH1-The Nature of Economics

  17. 哇！！！是神仙下凡嗎？？？ 阿仔，呢位就係我所講的朱咪咪小姐 CH1-The Nature of Economics

  18. 有著我便有著你，千個萬個世紀．．愛是永恆，當所愛是你．．．有著我便有著你，千個萬個世紀．．愛是永恆，當所愛是你．．． CH1-The Nature of Economics

  19. 阿媽！我得 O左啦！！！ CH1-The Nature of Economics

  20. Wants • Desires for things • Unlimited • In this case, wants may include: • To have a girlfriend • To be successful in his job • To have leisure time CH1-The Nature of Economics

  21. Resources • Things that used to satisfy our wants • Types: • Natural resources • Human resources • Man-made resources • In this case, resources may include: • Money & time CH1-The Nature of Economics

  22. Scarcity • We want more than we have CH1-The Nature of Economics

  23. Choice • Because we cannot satisfy all our wants with limited resources, we have to make choice. • In this case: • Dating with Betty? Alice? Juliet? CH1-The Nature of Economics

  24. Opportunity cost • The highest valued option forgone • In this case: • The OC of choosing to date with Juliet is the forgone dating with Alice? Betty? CH1-The Nature of Economics

  25. Scarcity, Choice & OC Limited resources Unlimited wants Scarcity Choice Opportunity cost CH1-The Nature of Economics

  26. Multiple Choice Exercise (1) Which of the following statements concerning wants is FALSE? Human wants will not exists if men are more concerned for others. Human wants are unlimited. The priority of wants for a person can change over time. Wants may be different for different persons. A B C D CH1-The Nature of Economics

  27. (2) Which of the followingstatements about choices is FALSE? In making choices, some wants have to be given up. It is scarcity that leads to choices. Sacrifice is involved in making choices. We always choose the alternative of the second priority A B C D CH1-The Nature of Economics

  28. (3) With limited pocket money, you rank soft drink first, followed by potato chips, and finally a sandwich. What is youropportunity cost of buying thebottle of soft drink? • Another bottle of soft drink. • A pack of potato chips. • A sandwich. • A pack of potato chips ora sandwich A B C D CH1-The Nature of Economics

  29. (4) The cost of an event is the Best option Best option forgone money spent. All options available A B C D CH1-The Nature of Economics

  30. (5) Scarcity 1. means that the amount ofresources is not sufficient tosatisfy all our wants. 2. means that we want more than wehave. 3. implies we have to make choices. (1) & (2) only (1) and (3) only (2) & (3) only (1) , (2) and (3) A B C D CH1-The Nature of Economics

  31. (6) Which of the following statementon “want” is CORRECT? If we are very rich, we can satisfy all our wants. Want refers to a desire as well as theability to satisfy that desire. Because of unlimited wants, wecannot satisfy some of our wants. People are willing to give up some oftheir wants. A B C D CH1-The Nature of Economics

  32. (7) The cost of an act will be zero if ….. there is no money the act has no result there is no price there is no scarcity or there is nochoice A B C D CH1-The Nature of Economics

  33. Remarks on Opportunity Cost Only the highest valued option forgone is regarded as cost CH1-The Nature of Economics

  34. Remarks on Opportunity Cost Cost changes only if the highest valued option forgone changes. Would the cost change if: No 1. the watch does not function as well as expected? 2. The book is now half-priced? Yes Increase Exercise 5: TB/P.11/MCQ 4 CH1-The Nature of Economics

  35. Remarks on Opportunity Cost Change in value  change in cost How does the cost change if the songs on the CD is not as good as expected? No Exercise 6: TB/P.12/Q 1.3 Exercise 7: TB/P.12/MCQ 5 Closer Look: TB/P.2/1.9 CH1-The Nature of Economics

  36. Economic Goods A good is economic good if its quantity available is i____________________ to satisfy all our wants Scarce resources are used in production More of it is p_______________ Quantity demanded (Qd) is larger than quantity supplied (Qs) at zero price Commanding a positive price Examples: air conditioner & sport shoes CH1-The Nature of Economics

  37. Free Goods A good is free good if its quantity available is s________________ to satisfy all our wants No scarce resources are used in production More of it is NOT preferred Quantity demanded is smaller than quantity supplied at zero price Commanding zero price Examples: Sea water & air on the earth CH1-The Nature of Economics

  38. Free Goods? Economic Goods? Sea water Tap water Economic Good Free Good Exercise 8: TB/P.13/MCQ 6 Exercise 9: TB/P.14/MCQ 7 Closer Look: TB/P.15/1.10 CH1-The Nature of Economics

  39. Free vs. Economic Goods CH1-The Nature of Economics

  40. Consumer Goods A consumer good is any good which satisfies human wants directly They are produced for direct consumption Examples: air-conditioners used in classrooms bread consumed by housewives CH1-The Nature of Economics

  41. Capital/Producer Goods • A capital good is any good that is used for producing other goods or services • They are produced for indirect consumption • Examples: • air-conditioners used at home • bread used as part of decoration in a bread shop CH1-The Nature of Economics

  42. Consumer or Capital Goods? Consumer Goods CH1-The Nature of Economics

  43. Consumer or Capital Goods? Capital Goods CH1-The Nature of Economics

  44. Consumer vs. Capital Goods Whether a good is consumer good or capital good is NOT classified by its nature, but by how and where it is being used. CH1-The Nature of Economics

  45. Basic Economic Problems • What to produce? • What kinds of product to be produced? • What quantity of it should be produced? • How to produce? • Which production method to be used? • For whom to produce? • How to distribute the quantity? • What criteria should be chosen? Exercise 10: TB/P.16/MCQ 8 CH1-The Nature of Economics

  46. Traditional Economy Economic decisions are made by referring to customs and traditions The three basic economic problems are being solved by following the practices of previous generations/ancestors. CH1-The Nature of Economics

  47. Planned/Command Economy Most/All economic decisions are made by the central authority Most of the productive resources are socially owned and under the control of the central government The three basic economic problems are being solved by following a set of c__________________ and o___________. CH1-The Nature of Economics

  48. What to produce? CH1-The Nature of Economics

  49. For whom to produce? CH1-The Nature of Economics

  50. Market Economy Most/All economic decisions are made by individuals Most of the productive resources are p________________ owned The three basic economic problems are being solved by p__________ m____________________. CH1-The Nature of Economics

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