Lecture Macroeconomics - Chapter 2: The economic problem: scarcity, wants, and choices

In this chapter you will learn: The foundation of economics, the nature of economic efficiency, how to achieve economic growth, the two general types of economic systems society can choose to co-ordinate production & consumption decisions, what the circular flow model is.

The The Economic Economic Problem: Problem: Scarcity, Scarcity, Wants, Wants, and and Choices Choices Chapter SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE © 2002 McGraw-Hill Ryerson Ltd Chapter In In this this chapter chapter you you will will learn learn The foundation of economics The nature of economic efficiency How to achieve economic growth The two general types of economic systems society can choose to co-ordinate production & consumption decisions What the circular flow model is © 2002 McGraw-Hill Ryerson Ltd Chapter 2 Chapter Chapter 22 Topics Topics The Foundation of Economics Getting the Most From Available Resources Unemployment, Growth & the Future Economic Systems The Circular Flow Model © 2002 McGraw-Hill Ryerson Ltd Chapter The The Foundation Foundation of of Economics Economics Society has virtually unlimited wants… © 2002 McGraw-Hill Ryerson Ltd Chapter The The Foundation Foundation of of Economics Economics Society has virtually unlimited wants… But resources are limited or scarce © 2002 McGraw-Hill Ryerson Ltd Chapter UNLIMITED UNLIMITED WANTS WANTS Goods & services provide utility Desire for a particular good can be satisfied, but not desire for goods in general © 2002 McGraw-Hill Ryerson Ltd Chapter RESOURCE RESOURCE CATEGORIES CATEGORIES Property Resources © 2002 McGraw-Hill Ryerson Ltd Chapter RESOURCE RESOURCE CATEGORIES CATEGORIES Property Resources Land © 2002 McGraw-Hill Ryerson Ltd Chapter RESOURCE RESOURCE CATEGORIES CATEGORIES Property Resources Land Capital © 2002 McGraw-Hill Ryerson Ltd Chapter RESOURCE RESOURCE CATEGORIES CATEGORIES Property Resources Notes Land INVESTMENT Capital FINANCIAL CAPITAL REAL CAPITAL © 2002 McGraw-Hill Ryerson Ltd Chapter 10 Qualification: Qualification: International International Trade Trade an individual nation is limited by the production possibilities curve but NOT when there is international specialization and trade! – possible to consume ABOVE the production possibilities curve © 2002 McGraw-Hill Ryerson Ltd Chapter 57 Examples Examples & & Applications Applications Unemployment & Productive Inefficiency – the Great Depression – discrimination Tradeoffs & Opportunity Costs – logging or wilderness? Shifts in Production Possibilities Curves – cell phones, the Internet © 2002 McGraw-Hill Ryerson Ltd Chapter 58 Chapter Chapter 22 Topics Topics The Foundation of Economics Getting the Most From Available Resources Unemployment, Growth & the Future Economic Systems The Circular Flow Model © 2002 McGraw-Hill Ryerson Ltd Chapter 59 Economic Economic Systems Systems resource allocation methods differ according to: – resource ownership – co-ordination method © 2002 McGraw-Hill Ryerson Ltd Chapter 60 The The Market Market System System private ownership of capital prices & markets co-ordinate activity independent actions of buyers & sellers limited role for government © 2002 McGraw-Hill Ryerson Ltd Chapter 61 The The Command Command System System socialism, communism government owns most resources central planning © 2002 McGraw-Hill Ryerson Ltd Chapter 62 Chapter Chapter 22 Topics Topics The Foundation of Economics Getting the Most From Available Resources Unemployment, Growth & the Future Economic Systems The Circular Flow Model © 2002 McGraw-Hill Ryerson Ltd Chapter 63 Circular Circular Flow Flow Model Model Figure 2-6 BUSINESSES © 2002 McGraw-Hill Ryerson Ltd Chapter 64 Circular Circular Flow Flow Model Model Figure 2-6 BUSINESSES © 2002 McGraw-Hill Ryerson Ltd HOUSEHOLDS Chapter 65 Circular Circular Flow Flow Model Model Figure 2-6 RESOURCE MARKET RESOURCES BUSINESSES © 2002 McGraw-Hill Ryerson Ltd INPUTS HOUSEHOLDS Chapter 66 Circular Circular Flow Flow Model Model ST S Figure 2-6 $ $ C O RESOURCE MARKET RESOURCES BUSINESSES © 2002 McGraw-Hill Ryerson Ltd IN C O M ES INPUTS HOUSEHOLDS Chapter 67 Circular Circular Flow Flow Model Model ST S Figure 2-6 $ $ C O RESOURCE MARKET RESOURCES BUSINESSES IN C O M ES INPUTS HOUSEHOLDS GOODS & SERVICES GOODS & SERVICES PRODUCT MARKET © 2002 McGraw-Hill Ryerson Ltd Chapter 68 Circular Circular Flow Flow Model Model ST S Figure 2-6 BUSINESSES © 2002 McGraw-Hill Ryerson Ltd SU M PT IO N GOODS & SERVICES N PRODUCT MARKET C O EN U E INPUTS HOUSEHOLDS GOODS & SERVICES R EV IN C O M ES $ $ C O RESOURCE MARKET RESOURCES $ $ Chapter 69 Chapter Chapter 22 Topics Topics The Foundation of Economics Getting the Most From Available Resources Unemployment, Growth & the Future Economic Systems The Circular Flow Model © 2002 McGraw-Hill Ryerson Ltd Chapter 70 T X NE Individual Markets Demand & Supply Chapter © 2002 McGraw-Hill Ryerson Ltd Chapter 71 ... In this this chapter chapter you you will will learn learn The foundation of economics The nature of economic efficiency How to achieve economic growth The two general types of economic systems... co-ordinate production & consumption decisions What the circular flow model is © 2002 McGraw-Hill Ryerson Ltd Chapter 2 Chapter Chapter 22 Topics Topics The Foundation of Economics Getting the. .. Resources Unemployment, Growth & the Future Economic Systems The Circular Flow Model © 2002 McGraw-Hill Ryerson Ltd Chapter The The Foundation Foundation of of Economics Economics Society has virtually