###Introduction to Economics PowerPoint Presentation###

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economics intro

Introduction to Economics

The Economic Problem

  • Unlimited Wants
  • Scarce Resources – Land, Labour, Capital
  • Resource Use
  • Choices
  • A wind farm. Copyright: Getty Images, available from Education Image Gallery

The Economic Problem

  • What goods and services should an economy produce? – should the emphasis be on agriculture, manufacturing or services, should it be on sport and leisure or housing?
  • How should goods and services be produced? – labour intensive, land intensive, capital intensive? Efficiency?
  • Who should get the goods and services produced? – even distribution? more for the rich? for those who work hard?

Opportunity Cost

  • Definition – the cost expressed in terms of the next best alternative sacrificed
  • Helps us view the true cost of decision making
  • Implies valuing different choices

Production Possibility Frontiers

  • Show the different combinations of goods and services that can be produced with a given amount of resources
  • No ‘ideal’ point on the curve
  • Any point inside the curve – suggests resources are not being utilised efficiently
  • Any point outside the curve – not attainable with the current level of resources
  • Useful to demonstrate economic growth and opportunity cost

Production Possibility Frontiers

  • Capital Goods
  • Consumer Goods
  • Yo
  • Xo
  • A
  • B
  • Y1
  • X1
  • Assume a country can produce two types of goods with its resources – capital goods and consumer goods
  • If it devotes all resources to capital goods it could produce a maximum of Ym.
  • If it devotes all its resources to consumer goods it could produce a maximum of Xm
  • Ym
  • Xm
  • If the country is at point A on the PPF It can produce the combination of Yo capital goods and Xo consumer goods
  • If it reallocates its resources (moving round the PPF from A to B) it can produce more consumer goods but only at the expense of fewer capital goods. The opportunity cost of producing an extra Xo – X1 consumer goods is Yo – Y1 capital goods.
  • Production Possibility Frontiers
  • Capital Goods
  • Consumer Goods
  • Yo
  • Xo
  • A
  • .B
  • C
  • Y1
  • X1
  • It can only produce at points outside the PPF if it finds a way of expanding its resources or improves the productivity of those resources it already has. This will push the PPF further outwards.

Positive and Normative Economics

  • Health care can be improved with more tax funding
  • Pollution control is effective through a system of fines
  • Society ought to provide homes for all
  • Any strategy aimed at reducing factory closures in deprived areas would be helpful
  • Positive Statements:
    • Capable of being verified or refuted by resorting to fact or further investigation
  • Normative Statements:
    • Contains a value judgement which cannot be verified by resort to investigation or research

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