Economics studies people in society and how they interact with each other.

We have a finite of resources that we can use to produce goods and services that we want, yet
we have unlimited needs and wants. This is the economic problem of scarcity, which leads to
the rationing of goods of goods and services by prices. Because people don't have unlimited
incomes choice then has to be made as to what they should buy. When a choice is made, an
alternative is forgone (Opportunity Cost).
We then need to allocate resources by answering these questions:

What should be produced and in what quantities?

How should things be produced?
Who should these things be produced for?

Factors of production

Land
Labor
Capital
Management

Production possibility curves

These are used to show the concepts of scarcity, choice, and opportunity cost. It shows the
maximum combinations of goods and services that can be produced by an economy in a given
time period, if all the resources in the economy are being used fully and efficiently and the state
of technology is fixed.
The PPC is a curve because not all factors of production used to build schools (in this example)
and produce cars are equally good at both things. This is the law of increasing opportunity cost.
As an economy devotes more of its resources to one product it becomes less efficient.
Producing inside the curve means not all resources are being used efficiently. Outside the curve
is impossible, unless the curve moves outwards due to increased production possibility (better
trained workers, machinery, more raw materials etc).
Utility
Utility is a measure of usefulness and pleasure. It can be measured by totals or marginally. Total
utility is total satisfaction gained from consuming a certain quantity of a product. Marginal utility
is extra utility gained from one more unit of a product. This usually falls as consumption
increases. It may even become negative after a while.
Positive and normative economics

Positive statements are objective, and can be proven right or wrong.

Normative statements are subjective and a matter of opinion.
Economists and model building
Theoretical models are used to test and illustrate theories, and can be manipulated to see
outcomes if there is a change in one of the variables, using the phrase ceteris paribus.
Planned economies vs free market economies
Planned economies: the questions of allocating resources are all answered by
the government. All resources are collectively owned. They arrange all production, set
wages, etc. However, this is very difficult to do.
Free market economies: prices are used to ration goods. Everything is set in
private hands, including wages by power of demand and supply. However this may take
some time.

Economic growth
This is the increase of national income (value of goods and services in a country in a given time
period).
It can be measured by expenditure, value of goods and services, or value of rent, wages, etc
paid. Inflation is ignored and this is then called real national income. But this does not tell us
about how people in the economy are better or worse off.
Economic development

This is more a measure of welfare, using other economic indicators such as literacy rate. The
most common economic development measure is The Human Development Index. It is made
up of:
GDP per capita
Adult literacy rate
Average years of schooling
Life expectancy