RI 2022 Central Problem of Economics

CENTRAL PROBLEM OF ECONOMICS CONTENTS: 1. What is Economics? 2. Scarcity, Choice and Opportunity Costs 3. The Decision-Making Framework 4. The Production Possibility Curve (PPC) Model This series of lectures provides an introduction to economics and the central problem of economics: scarcity. Faced with limited resources and unlimited wants, economic agents have to make choices. However, this results in trade-offs and opportunity costs. RAFFLES INSTITUTION YEAR 5 ECONOMICS 2022 LECTURE NOTES ECONOMICS

Raffles Institution Economics Department RAFFLES INSTITUTION YEAR 5 ECONOMICS 2022 Outline of Contents 1 What is Economics? 1.1 Introduction to Economics 1.2 Microeconomics vs. Macroeconomics 2 Scarcity, Choice and Opportunity Costs 2.1 Scarcity 2.2 Resources 2.3 Inevitability of Choices - Making Rational Choices 3 The Decision-Making Framework 3.1 Rational Decision-Making by Economic Agents 3.2 Rational Decision-Making on an Economy-Wide Perspective 4 The Production Possibility Curve (PPC) Model 4.1 Scarcity 4.2 Choice 4.3 Opportunity Cost 4.4 Efficiency 4.5 Movements from a point within to on the PPC 4.6 Factors causing shifts of the PPC 5 Conclusion Appendix Appendix 1: The Economic Decision-making Process CENTRAL PROBLEM OF ECONOMICS

Raffles Institution Economics Department References 1 Sloman, J., Economics, 8th Edition, Hertfordshire: Prentice Hall* 2 Beardshaw, J., Economics: A Student’s Guide, 5th Edition, Pearson Education* 3 Mankiw, Quah& Wilson, Principles of Economics: An Asian Edition: Cengage Learning* Lipsey & Courant, Economics, 11th Edition, Harper Collins 4 Colin Bamford & Susan Grant, Cambridge International AS & A Level Economics, 2nd Edition, Cambridge 5 Joycelyn Blink and Ian Dorton, IB Diploma Program, Economics (course companion), Oxford 6 Tutor2u, www.tutor2u.net * Primary References Lecture Objectives: After the series of lectures, students should be able to: • Differentiate between microeconomics and macroeconomics • Differentiate between positive and normative statements • Explain the central problem of economics (scarcity) and the inevitability of choice by economic agents • Define and explain the concept of opportunity cost and the nature of trade-offs in the allocation of resources • Explain rational decision making by economic agents • Use the PPC model to explain and illustrate: o Scarcity, choice and opportunity cost o Attainable and unattainable points o Efficiency • Explain and illustrate the effects of changes on the PPC curve

Year 5 Economics Lecture Notes 2022 Central Problem of Economics Raffles Institution Economics Department 4 1 WHAT IS ECONOMICS? 1.1 INTRODUCTION TO ECONOMICS Economics is a science that studies human behaviour and how individuals and societies deal with scarcity – the central problem of economic