Introduction to Economics
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Introduction to 
Economics
The Economic Problem
Opportunity Cost
Production Possibility 
Frontiers
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The Economic Problem
• Unlimited Wants
• Scarce Resources 
– Land, Labour, 
Capital
• Resource Use
• Choices
A wind farm. Copyright: Getty Images, 
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The Economic Problem
• What goods and services should an 
economy produce? – should the emphasis 
be on agriculture, manufacturing or services, 
should it be on sport and leisure or housing?
• How should goods and services be 
produced? – labour intensive, land intensive, 
capital intensive? Efficiency?
• Who should get the goods and services 
produced? – even distribution? more for the 
rich? for those who work hard?
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Opportunity Cost
• Definition – the cost expressed in terms 
of the next best alternative sacrificed
• Helps us view the true cost of decision 
making
• Implies valuing different choices
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Production Possibility Frontiers
• Show the different combinations of goods and 
services that can be produced with a given 
amount of resources
• No ‘ideal’ point on the curve
• Any point inside the curve – suggests 
resources are not being utilised efficiently
• Any point outside the curve – not attainable 
with the current level of resources
• Useful to demonstrate economic growth and 
opportunity cost
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Production Possibility 
Frontiers If it devotes all 
Capital Goods IAf stshuem ceo au ncotruyn tirsy  Ifcr eaitsa  gto on
roe uparcepdosi
lrlnoc iot td
sa tuteocs e cit ast pwitoa l 
resources (c moAou vlodinn g  rtohuend  
Ym PthptPyer opFPde PuIFstc  f eorco fam g n mAo  aotoxd isBm ) uitm c an 
ppowrrofio dtYuhdmc uei.t cmse or retehs coeoun srucmese r g–ooco mc
das pbiutta ol nglyo aotd tshe  
eIxfp ietn dbsei vnoofa tfteiswo eanrl l c oiatpfsi tYalo 
A garoenosddos u.consumer 
 
Yo capit arTclhe egood g
s o otpop odrstu naitny d 
ccoostn osfXo cu
 sp
om
ro
ne
dru gcoinogd asn i te xtra 
coo – X1 co
snumer uld prodsuucmee ra  goods 
gis oYo – Y1 capital goods.maoxdimsum of Xm
Y1 B
Xo X1Xm Consumer Goods
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Production Possibility 
Frontiers It Pcraon dounlcyt piorond uce at 
Capital Goods poininstsid outside the PPF if it findes  at hweay P oPf F 
ex–p aen.dgin.g p itosi nt B 
remsoeuracnes  otrh ime proves 
C the p
Y1 cou
rondturcyt ivisit yn oof t 
those resources it 
A al
uresaidnyg h aasl.l  Tithsis  will 
Yo pursehs tohue rPcPeFs f urther 
. outwards.B
Xo X1 Consumer Goods
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Positive and Normative 
Economics
• Health care can be • Positive Statements: 
improved with more tax – Capable of being verified 
funding or refuted by resorting 
• Pollution control is effective to fact or further 
through a system of fines investigation
• Society ought to provide • Normative 
homes for all Statements:
• Any strategy aimed at – Contains a value 
reducing factory closures in judgement which cannot be verified by resort to 
deprived areas would be investigation or research
helpful – https://www.expertsmin
• https://www.expertsminds. ds.com/assignment-
com/ help/economics-2.html
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