Economics & Economics of Education
1 a ii). Examine the concept of the law of economics.
Basic principle/law of economics
When choosing among a number of alternative possibilities, one should choose that alternative which minimizes the cost of achieving the desired benefit or, alternatively, maximizes the benefit of satisfaction derived from a given coast.
What are the economic tools of analysis?
The question of choice plays a central role in economics. Whenever a choice is to be made, there is need for one to be well informed on the costs and benefits associated with the choice taken. Some of the tools used by economists to achieve the above are :
- Cost-benefit analysis
- Discounted cash flow
- Internal rate of return
- Cost-effectiveness analysis
Demand and supply
A good is anything that satisfies or is capable of satisfying a human want. Some common dichotomization of goods are:
- Free goods versus economic goods
- Free good: goods which are so abundant that they do not need to be economized, e.g. air.
- Economic good: A good that is scarce and is capable of being apportioned or economized, e.g. education. Economics is only concerned with economic goods.
- Material goods versus Non-material goods; Economic goods are either material or nonmaterial
- A material good is physical and tangible
- A non-material good is a service rendered by a free person which satisfies a want e.g. education.
- Private goods versus and public goods;
Economic goods can be classified as public and private. When the use of a good such as a school, hospital, a highway etc. is free to an individual, but obtained at a cost to the community, it is a public good. When an individual or a firm acquires a good for private use, it is a private good.