Economy discipline

Economic is the study of how people choose to use resourses. It also a science that deals with the production, allocation and use of goods and services.

2. … is the study of how people choose to use resources.
Science that deals with the production, allocation and use of
goods and services.
It is important to study how
resources can be best distributed
to meet the needs of the people.

3. As decision making process – household (individual); firms
(private sectors); government.
As guidance for country development – theories help
leaders in economic development.
As problem solving.

5. Microeconomics and macroeconomics are closely intertwined.

6. Microeconomics
Focuses on the
individual parts of the
economy.
How households and firms
make decisions.
How they interact in specific
market.
Macroeconomics
Looks at the economy as a
whole (economy performance).
Economy – wide phenomena
including inflation,
unemployment, economic
growth.

7. DEFINITIONS
“… it deals with how scarce
resources are allocated to
maximize the unlimited wants that
we want to fulfill”
(Hashim, 1990)
The study of how society manage
its scarce resources
(Mankiw,1997)

8. It focused on THREE (3) main things.
Unlimited wants and needs.
Resources and scarcity.
Choice and opportunity cost.

11. Refers to all natural resources used to produce goods
and services.
This includes crops that are grown on a land, minerals
that are mined from land.
Rent that is paid to an owner of
land for its use.

12. Represents anything that can help production process.
Included physical capital and non physical capital.
E.g. machines, cars, share, money
Received income in term of interest.

13. This is the effort that an individual person puts into
making a good or service.
This for the effort the person is paid a wage.
Labor includes factory workers, medical
personal, and teachers.
They all provide their labor for a wage.

14. Someone who creates system to offer a product or
service in order to obtain certain profit.
Income - profit

15. Choice & Opportunity Cost
Conflicting goals of unlimited wants and resources
scarcity implies to make choices regarding allocation.
Opportunity cost – something which must be sacrificed
in order to obtain something else (next best
alternative forgone).
Production based on opportunity cost in society can
be measured by using production possibility curve or
Mass Selection Curve.

16. What and how much to produce?
Solve through price theory
How to produce?
Solve through production theory
How to distribute goods and services
amongst individual and group?
Solve through distribution theory

17. Positive Economics
Positive statement
Capable being verified or refuted by
resorting to fact or further investigation.
E.g. “Health care can be improved with more tax funding”;
“Pollution control is effective through a system of fines”

18. Normative Statement
Contains a value judgment which cannot be verified by
resort to investigate or research.
E.g. “Society ought to provide homes for all”;
“Any strategies aimed at reducing factory closures in
deprived areas would be helpful”

19. Economic Systems

20. Economies rely on customs and rituals.

21. (laissez-faire, market economy, free
enterprise, price mechanism, free market
economy)
No government intervention/interference
Existence of consumer sovereignty
Mobility of labor
Right to own property
Presence of competition
Motivated by profits
E.g. US, Canada

22. (planned economy, communist system,
centrally-planned economy, controlled
economy, totalitarian economy)
Everything is planned by the government.
Consumers have no choice.
Absence of competition
Theoretically, unemployment does not
exist.

23. Theoretically, there is no difference
between the rich and the poor (classless
society).
No business freedom
Government may produce goods that are
not required by the public.
e.g. North Korea

24. (Regulated Market Economy)
Both public & private sectors.
The public sector complement the private
sector.
The government will intervene in particular
matters/industries.
Reduce income inequality.
Control the existence of monopolies.
E.g. Malaysia, Singapore, Britain

25. Malaysia Economy
Malaysia was under British and also its
economy.
British changed Malaysia economy
structure.
Ownership land system by registration called
Torrens system
Took over rubber plantation
Took over mining from Malay elites and Chinese
by using their huge capital.
Agriculture still at the Malay hand.
Chinese and Indian were brought as immigrant
labors by British.

26. Malaysia Economy
After independence:
Introduce New Economic Policy (NEP) after
the 13 May 1969 riot caused by imbalance
in economy.
NEP was introduced to overcome inter-
ethnic economic imbalance. Allowed state
intervention.
Development oriented strategy and growth oriented
strategy.
Malaysia applied economic diversification.

28. Some food for thought…
When economists are trying to explain the
world, they are scientists.
When economists are trying to change the
world, they are policy advisor.

29. Thank you . . .