chapter1_macro.pptVIP

Chapter OneThe Economic Problem OBJECIVES NEW TERMS HOME This Chapter Will Enable You To: Realize that scarcity, choice and cost are at the heart of economics and the best way of measuring cost is in terms of the sacrifice which results from making a choice. Explain the three fundamental questions that all societies must address and realize that the answers depend on how society is organized. This Chapter Will Enable You To Cont’d : Understand why abstraction and the use of simple models are important in learning to do economic analysis. Understand the economic goals of society and explain why they are often difficult to achieve. Scarcity, Choice and Opportunity Cost Scarcity Society must allocate limited productive resources among competing uses Choice The decision to produce one thing means that some other thing will not be produced Opportunity cost What must be given up as a result of making a particular choice Consumer goods and services Products used by consumers to satisfy their wants. Factors Of Production The productive resources that are available to an economy, categorized as land, labour, capital and enterprise. Land. Any natural resource that can be used to produce goods and services. Labour. Human physical and mental effort that can be used to produce goods and services. Factors Of Production Cont’d Capital. All human-made resources that can be used to produce goods and services. Enterprise. The human resource that innovates and takes risk. Economics Is the study of the allocation of scarce resources to produce goods and services. Macroeconomics The study of how the major components of an economy interact. Microeconomics The study of the individual decision making units in the economy. Three Fundamental Questions Of Economics What to produce? How to produce? For whom? Types Of Economies Cooperation Determines what work needs to be done, how it is to be done, and who is to obtain what share of the produce Custom Determines who performs whic