EC1150 Macroeconomics Introduction 1. of 27 Copyright © 2008 Pearson Education Canada Instructor: Andrea Best Instructor’s Phone Number: 709-292-5664.

EC1150 MacroeconomicsIntroduction

1

of 27

Copyright © 2008 Pearson Education Canada

Instructor: Andrea Best Instructor’s Phone Number:

709-292-5664

Lecture Notes and Assignments available at:http://andreabest.wikispaces.com/

E-mail assignments to [email protected]

If this is your first economics course, please read chapters 1 and 2 of your text

2

Important Information:

of 27


Attend Class – come prepared with notes Read the chapters as assigned Do the assignments Re-do the assignments for practice Review lecture notes Go online and look for additional practice Do not leave studying until the night before

3

Keys to Success

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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 The value of the next-best alternative that is

given up as a result of making a particular choice

Consumer goods and services Products used by consumers to satisfy their

wants.4

Scarcity, Choice & Opportunity Cost

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Scarcity, Choice & Opportunity Cost

5

ScarcityScarcity ChoiceChoice Opportunity Opportunity costcost

forceswhich

involves

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The study of……the ways that humans organize themselves……to make the necessary choices……about how scarce resources are to be used to

produce goods and services……necessary to satisfy human wants and needs

6

A Definition of Economics

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Macroeconomics The study of how the major components of

an economy interact. Includes topics of unemployment, inflation, interest rate policy and government spending and taxation

Microeconomics The study of the outcomes of decisions by

people and firms through a focus on demand and supply, the costs of production, and market structures

7

Economics: Fields of Study

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The productive resources that are available to an economy, categorized as land, labour, capital and enterprise.

1. Land Any natural resource that can be used to produce

goods and services.

2. Labour Human physical and mental effort that can be

used to produce goods and services.

8

Four Factors of Production

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3. Capital. All human-made resources that can be used to

produce goods and services.

4. Enterprise. The human resource that innovates and takes risk.

9

Four Factors of Production

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1. Wages Payment and income for the use of labour

2. Interest Payment and income for the use of capital

3. Rent Payment and income for the use of land

4. Profit Goes to the owners of the firm

10

Incomes of Factors of Production

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Incomes of Factors of Production

11

Factor

Land Labour Capital Enterprise

Factor payment

RentWagesInterestProfits

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Model Example One: Circular Flow

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Business Business sectorsector

Household sector

Factor incomes: rent, wages, interest, profitFactor incomes: rent, wages, interest, profit

Factors of production: labour, Factors of production: labour, capital, land & enterprisecapital, land & enterprise

Consumer goods & servicesConsumer goods & services$$

$$

Household Household sectorsector

Consumption spendingConsumption spending

Figure 1.1

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Macroeconomic Goals

13

Improved standard of living Economic growth Full employment Stable prices Viable balance of international trade Equitable distribution of income Manageable government debt & deficit

EC1150 Macroeconomics Introduction 1. of 27 Copyright © 2008 Pearson Education Canada Instructor: Andrea Best Instructor’s Phone Number: 709-292-5664.

Documents

factors of productionof

scarce resources

assignments available

human wants

human resource

limited productive resources

costs of production

profitfactors of production