EC1150 Macroeconomics Introduction 1

of 27 Copyright © 2008 Pearson Education Canada  Instructor: Andrea Best  Instructor’s Phone Number:  Lecture Notes and Assignments available at: assignments to  If this is your first economics course, please read chapters 1 and 2 of your text 2 Important Information:

of 27 Copyright © 2008 Pearson Education Canada  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

of 27 Copyright © 2008 Pearson Education Canada  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

of 27 Copyright © 2008 Pearson Education Canada Scarcity, Choice & Opportunity Cost 5 ScarcityChoice Opportunity cost forces which involves

of 27 Copyright © 2008 Pearson Education Canada 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

of 27 Copyright © 2008 Pearson Education Canada  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

of 27 Copyright © 2008 Pearson Education Canada  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

of 27 Copyright © 2008 Pearson Education Canada 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

of 27 Copyright © 2008 Pearson Education Canada 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

of 27 Copyright © 2008 Pearson Education Canada Incomes of Factors of Production 11 Factor  Land  Labour  Capital  Enterprise Factor payment Rent Wages Interest Profits

of 27 Copyright © 2008 Pearson Education Canada Model Example One: Circular Flow 12 Business sector Household sector Factor incomes: rent, wages, interest, profit Factors of production: labour, capital, land & enterprise Consumer goods & services $ $ Household sector Consumption spending Figure 1.1

of 27 Copyright © 2008 Pearson Education Canada 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