Скачать презентацию Introduction to Economics The subject area of
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Скачать презентацию Introduction to Economics The subject area of
Скачать презентацию Introduction to Economics The subject area of
Introduction to Economics
The subject area of economics Every group of people must solve three basic problems of daily living: • what goods and services to produce • how to produce them • for whom to produce them
An example: Oil price fluctuations The price of oil tripled in 1973 -74, and doubled again in 1979 -80. It rose sharply again in 2008.
Higher oil prices • make the economy produce in a way that uses less oil • reduce the demand for oil-related commodities encouraging consumers to purchase substitute commodities • make the world economy produce more for OPEC and less for the big oil importers (e. g. , Germany and Japan)
Markets are central to economics • They are the process by which … Ø households’ decisions about consumption of alternative goods Ø firms’ decisions about what and how to produce Ø and workers’ decisions about how much and for whom to work • … are all reconciled by the adjustment of prices
The invisible hand The command economy has tended not to perform well. In contrast, Adam Smith in the Wealth of Nations (1776) argued that individuals pursuing their selfinterest would be led ‘as by an invisible hand’ to do things that are in the interests of society as a whole.
A mixed economy • In a mixed economy the government and private sector jointly solve economic problems. • The government influences decisions through taxation, subsidies, and provision of free services such as defence and the police. • It also regulates the extent to which individuals may pursue their own self-interest.
Units of food (millions) A production possibility curve / frontier (PPF) Units of food Units of clothing (millions) 8 m 7 m 6 m 5 m 4 m 3 m 2 m 1 m 0 0. 0 2. 2 m 4. 0 m 5. 6 m 6. 0 m 6. 4 m 6. 7 m 7. 0 m Units of clothing (millions)
A production possibility curve Units of food (millions) a Units of food Units of clothing (millions) a 8 m 7 m 6 m 5 m 4 m 3 m 2 m 1 m 0 0. 0 2. 2 m 4. 0 m 5. 6 m 6. 0 m 6. 4 m 6. 7 m 7. 0 m Units of clothing (millions)
A production possibility curve Units of food (millions) b Units of food Units of clothing (millions) b 8 m 7 m 6 m 5 m 4 m 3 m 2 m 1 m 0 0. 0 2. 2 m 4. 0 m 5. 6 m 6. 0 m 6. 4 m 6. 7 m 7. 0 m Units of clothing (millions)
A production possibility curve Units of food (millions) c Units of food Units of clothing (millions) c 8 m 7 m 6 m 5 m 4 m 3 m 2 m 1 m 0 0. 0 2. 2 m 4. 0 m 5. 6 m 6. 0 m 6. 4 m 6. 7 m 7. 0 m Units of clothing (millions)
Units of food (millions) A production possibility curve Units of food Units of clothing (millions) 8 m 7 m 6 m 5 m 4 m 3 m 2 m 1 m 0 0. 0 2. 2 m 4. 0 m 5. 6 m 6. 0 m 6. 4 m 6. 7 m 7. 0 m Units of clothing (millions)
Units of food (millions) A production possibility curve Units of clothing (millions)
The law of diminishing returns Each extra worker adds less to output than the previous extra worker added.
A production possibility curve Units of food (millions) x Units of clothing (millions) w
Increasing opportunity costs Units of food (millions) x 1 y 1 2 z 1 Units of clothing (millions)
The opportunity cost of a good is the quantity of other goods that must be sacrificed. Food output (F) F/ G = opportunity cost (=1/2) 14 A F= 4 10 G = 8 6 B 14 Begin from point A with 14 units of food and 6 films. Moving from A to B, we gain 8 films but lose 4 units of food. Production possibility frontier Film output (G) Thus, 4 units of food is the opportunity cost of producing an additional 8 films.
Making a fuller use of resources x Food Production inside the production possibility curve y v O Clothing
Food Growth in potential output Now O Clothing
Growth in potential output Food 5 years’ time Now O Clothing
Growth in potential and actual output y Food x O Clothing
The circular flow of goods and incomes
The circular flow of goods and incomes Goods and services
The circular flow of goods and incomes Goods and services £ Consumer expenditure
The circular flow of goods and incomes Goods and services £ Consumer expenditure Services of factors of production (labour, etc)
The circular flow of goods and incomes Goods and services £ Consumer expenditure Wages, rent dividends, etc. £ Services of factors of production (labour, etc)
Скачать презентацию Introduction to Economics The subject area of
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