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ECO162: PRINCIPLES OF MICROECONOMICS

By: Dr. MAHYUDIN BIN AHMAD ECONOMICS LECTURER UiTM KAMPUS SG PETANI KEDAH

Definition:
Economics defined:

A social science study that is concerned with rational human behavior in using their limited resources efficiently to satisfy their unlimited wants.

Scopes:

Microeconomics
Individual decision making (consumer, firm) Objective: Consumer satisfaction, Firm profits Issues: Price, D&S, firms production, cost, etc.

Macroeconomics
Overall economic performance, a countrys economy General objectives: long term, strategic, bigger scale Issues: National income, inflation, unemployment, etc

Concepts:
Basic concepts:

Scarcity limitedness of the resources

Choice alternative uses available


Opportunity costs 2nd best alternative forgone

Resources:
From producer point of view:

Land : all gift of nature; land, forest, mineral, oil deposit and water Labor : all human physical and mental efforts but excluding entrepreneurial ability Capital : all manufactured aids; tools, equipments, machinery; money is not capital Entrepreneurial Ability: special ability to gather and transform all other resources into product/service

Problems:
What goods and services should an economy produce? should the emphasis be on agriculture, manufacturing or services? How should goods and services be produced? labour intensive, land intensive, capital intensive? Efficiency? How much should the goods and services be produced quantity usually based on available resources, market demand, etc. To whom should the goods and services be produced? distribution? ?

Economic Systems:
Capitalist system (Example: US, Canada, Japan)

Laissez faire, market economy, free entreprise, price mechanism, free market, Completely free, with very limited or no govt intervention Consumer sovereignty

Highly competitive
Profit motivation

Economic Systems:
Communist system (example: China, Korea, Cuba)

Command economy, centrally planned, controlled economy, planned economy Complete control by government: Decision on basic economic problems solved solely by govt No consumer sovereignty

Absence of competition, no business freedom

Economic Systems:
Mixed economy system (example: Malaysia, Singapore, Britain)

Both public and private sectors are complementary

Government intervention in certain sectors welfare objectives


Income inequality reduced Control the existence of monopolies

Economic Systems:
Islamic system

Alternative to other conventional systems Concerned on human activities to obtain, use, and manage the economic resources according to Syariah For the betterment of oneself and whole society, materially and spiritually With the objective of achieving al-Falah: Blessing of Allah in this world and hereafter

Economic Systems:
Concepts: - Tauhid: Relationship between man & Allah - Khalifah: relationship between man and man - Tazkiyyah: purification of humans soul, wealth - Ukhwah: social justice, brotherhood, helping each other Principles of Islamic economy: - Private ownership, but not absolute - Regulated freedom, - Government intervention for welfare protection