UPDATED NOTES ON INTRODUCTION TO ECONOMICS OF EDUCATION AND HUMAN CAPITAL THEORY

Economics is a social science which studies allocation of scarce resources which have alternative uses among competing and limitless wants of the consumer in the society. It therefore concerns the way people apply knowledge, skills and effort to satisfy human wants or provide for material well being. Human wants – Refer to peoples’ desire for goods and services and circumstances that enhance material well being. Economics resources – These are ingredients available for providing goods and services. They are also called factors of production which include land, labour, capital and entrepreneurship. A resource must be scarce and have money value. Resources are categorized as either natural or manmade i. Natural resources – Refer to anything given by nature example soils, lakes and mountains. ii. Man-made resources – Refer to anything created by man to assist in production of goods and services example tools, equipment and building. Scarcity and Choice Scarcity - Resources are scarce if their availability is not enough to produce goods and services to satisfy all wants. Resources are therefore said to be limited and hence choices have to be made. Choice is the decision to satisfy one want out of many alternatives. This means others have to be forgone. Opportunity cost Refer to the value of benefit expected from the best second alternative forgone. Since resources are scarce and have competing alternative uses, choice to satisfy one means another is forgone Economic and Non Economic goods Economic goods – These are goods produced with scarce resources e.g. clothes and therefore a price has to be paid to obtain them. Non – Economic goods – are free goods hence no price has to be paid for them e.g. sunshine, ai

The notes overview gives you a general introduction to basics in economics