Introduction: Economic Issues

1. Introduction: Economic Issues

2. Burlington Central High School Mr. LaPlante Grade 12 University Credit Economics Unit 1 Chapters 1-3 The Nature of Economics and the Economy

3. Economics and Key Skills • Note taking • News Issues & Analysis • Debate • Research • Organisation • Interpreting graphs and statistics

4. Basic principles of economics “Social Science of Scarcity and Choice”

5. Economics defined Greek origins Oikos - “house” Nemo “to manage” Wise management of one’s house “The study of the way we make decisions about the use of scarce resources” Why? Because our needs and wants are insatiable and our resources are finite

6. Human Behaviour • Rational and social beings therefore we are able to predict the groups behaviour but not always the individuals that make up the group. • Knowledge of the group behaviour can be useful for decision makers.

7. As a student are you?... Effective? Using resources to achieve the desired results Efficient? Using the bare minimum of resources to achieve the desired result Economic decisions need to be both effective and efficient

8. Efficiency means we have to realise we give up something else to achieve our goals Opportunity costs- the sum of all that is lost from taking one course of action over another.(maximum potential loss)

9. The Economic Problem • Economic problems • production and consumption • Scarcity: the central economic problem • Macroeconomic ideas • growth • unemployment • inflation • balance of payments problems • cyclical fluctuations

10. The Economic Problem • Microeconomic issues • choices: • what • how • for whom • the concept of opportunity cost • rational decision making

11. What are the four categories of Resources? Land Labor Capital Entrpreneurship

12. What is aLand Resource? A shorthand expression for any natural resource provided by nature

13. What is Labor? The mental and physical capacity of workers to produce goods and services

14. What is Capital? The physical plants, machinery, and equipment used to produce other goods

15. What isFinancial Capital? The money used to purchase capital

16. What is Entrepreneurship? The creative ability of individuals to seek profits by combining resources to produce innovative products

17. Labor Land Capital Entrepreneurship organizes resources to produce goods and services

18. What isCeteris Paribus? A Latin phrase that means that while certain variables can change, “all other things remain unchanged”

19. What isPositive Economics? An analysis limited to statements that are verifiable

20. What isNormative Economics? An analysis based on value judgement

21. Society Chooses Resources Scarcity Unlimited wants

22. The Economic Problem • The production possibility curve • what the curve shows

23. Units of food Units of clothing (millions) (millions) 8m 0.0 7m 2.2m 6m 4.0m 5m 5.0m 4m 5.6m 3m 6.0m 2m 6.4m 1m 6.7m 0 7.0m A production possibility curve Units of food (millions) Units of clothing (millions)

24. A production possibility curve a Units of food Units of clothing (millions) (millions) a 8m 0.0 7m 2.2m 6m 4.0m 5m 5.0m 4m 5.6m 3m 6.0m 2m 6.4m 1m 6.7m 0 7.0m Units of food (millions) Units of clothing (millions)

25. A production possibility curve b Units of food Units of clothing (millions) (millions) 8m 0.0 b 7m 2.2m 6m 4.0m 5m 5.0m 4m 5.6m 3m 6.0m 2m 6.4m 1m 6.7m 0 7.0m Units of food (millions) Units of clothing (millions)

26. A production possibility curve c Units of food Units of clothing (millions) (millions) 8m 0.0 7m 2.2m c 6m 4.0m 5m 5.0m 4m 5.6m 3m 6.0m 2m 6.4m 1m 6.7m 0 7.0m Units of food (millions) Units of clothing (millions)

27. A production possibility curve Units of food Units of clothing (millions) (millions) 8m 0.0 7m 2.2m 6m 4.0m 5m 5.0m 4m 5.6m 3m 6.0m 2m 6.4m 1m 6.7m 0 7.0m Units of food (millions) Units of clothing (millions)

28. A production possibility curve Units of food (millions) Units of clothing (millions)

29. w A production possibility curve x Units of food (millions) Units of clothing (millions)

30. The Economic Problem • The production possibility curve • what the curve shows • microeconomics and the p.p. curve:

31. The Economic Problem • The production possibility curve • what the curve shows • microeconomics and the p.p. curve: • choices and opportunity cost

32. The Economic Problem • The production possibility curve • what the curve shows • microeconomics and the p.p. curve: • choices and opportunity cost • increasing opportunity cost

33. 1 1 2 1 Increasing opportunity costs x y Units of food (millions) z Units of clothing (millions)

34. The Economic Problem • The production possibility curve • what the curve shows • microeconomics and the p.p. curve: • choices and opportunity cost • increasing opportunity cost • macroeconomics and the p.p. curve:

35. The Economic Problem • The production possibility curve • what the curve shows • microeconomics and the p.p. curve: • choices and opportunity cost • increasing opportunity cost • macroeconomics and the p.p. curve: • production within the curve

36. Making a fuller use of resources x Production inside the production possibility curve y v Food O Clothing

37. The Economic Problem • The production possibility curve • what the curve shows • microeconomics and the p.p. curve: • choices and opportunity cost • increasing opportunity cost • macroeconomics and the p.p. curve: • production within the curve • shifts in the curve

38. Growth in potential output Now Food O Clothing

39. Growth in potential output 5 years’ time Food Now O Clothing

40. Growth in potential and actual output Food O Clothing

41. Growth in potential and actual output y x Food O Clothing

42. Canada’s Economic Goals • Political stability • Reduced Public Debt • Economic growth • Increased productivity and Efficiency • Equitable distribution of Income • Price Stability • Full Employment • Viable balance of payments and Stable Currency • Economic Freedom • Environmental stewardship

43. The Economic Problem • The circular flow of income • firms and households

44. The circular flow of goods and incomes

45. The Economic Problem • The circular flow of income • firms and households • goods markets • real flows: goods and services

46. The circular flow of goods and incomes

47. The circular flow of goods and incomes Goods and services

48. The Economic Problem • The circular flow of income • firms and households • goods markets • real flows: goods and services • money flows: consumer expenditure

49. The circular flow of goods and incomes Goods and services

50. The circular flow of goods and incomes Goods and services $ Consumer expenditure