Introduction: Economic Issues Introduction: Economic Issues

The Economic Problem Economic problems –production and consumption –scarcity: the central economic problem Macroeconomic issues –growth –unemployment –inflation –balance of trade deficits –cyclical fluctuations Economic problems –production and consumption –scarcity: the central economic problem Macroeconomic issues –growth –unemployment –inflation –balance of trade deficits –cyclical fluctuations

The Economic Problem Microeconomic issues –choices: what how for whom –the concept of opportunity cost –rational decision making weighing up marginal costs and marginal benefits –the social implications of choice Microeconomic issues –choices: what how for whom –the concept of opportunity cost –rational decision making weighing up marginal costs and marginal benefits –the social implications of choice

The Economic Problem The production possibility curve –what the curve shows –microeconomics and the p.p. curve: choices and opportunity cost increasing opportunity cost –macroeconomics and the p.p. curve: production within the curve shifts in the curve The production possibility curve –what the curve shows –microeconomics and the p.p. curve: choices and opportunity cost increasing opportunity cost –macroeconomics and the p.p. curve: production within the curve shifts in the curve

The Economic Problem The circular flow of income –firms and households –goods markets real flows: goods and services money flows: consumer expenditure –factor markets real flows: services of labour and other factors money flows: wages and other incomes The circular flow of income –firms and households –goods markets real flows: goods and services money flows: consumer expenditure –factor markets real flows: services of labour and other factors money flows: wages and other incomes

The Economic Problem The circular flow of income (cont.) –macroeconomic issues the size of total flows –microeconomic issues individual markets choices within goods and factor markets The circular flow of income (cont.) –macroeconomic issues the size of total flows –microeconomic issues individual markets choices within goods and factor markets