1. Introduction:
Economic Issues

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

3. 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

4. The Economic Problem The production possibility curve
what the curve shows 4

5. A production possibility curve
Units of food Units of clothing
(millions) (millions) 8m
7m m
6m m
5m m
4m m
3m m
2m m
1m m m
Units of food (millions)
Units of clothing (millions)

6. A production possibility curve
Units of food Units of clothing
(millions) (millions)
a m
7m m
6m m
5m m
4m m
3m m
2m m
1m m m
Units of food (millions)
Units of clothing (millions)

7. A production possibility curve
Units of food Units of clothing
(millions) (millions) 8m
b m m
6m m
5m m
4m m
3m m
2m m
1m m m
Units of food (millions)
Units of clothing (millions)

8. A production possibility curve
Units of food Units of clothing
(millions) (millions) 8m
7m m
c m m
5m m
4m m
3m m
2m m
1m m m
Units of food (millions)
Units of clothing (millions)

9. A production possibility curve
Units of food Units of clothing
(millions) (millions) 8m
7m m
6m m
5m m
4m m
3m m
2m m
1m m m
Units of food (millions)
Units of clothing (millions)

10. A production possibility curve
Units of food (millions)
Units of clothing (millions)

11. A production possibility curvew x
Units of food (millions)
Units of clothing (millions)

12. The Economic Problem The production possibility curve
what the curve shows
microeconomics and the p.p. curve: 4

13. The Economic Problem The production possibility curve
what the curve shows
microeconomics and the p.p. curve:
choices and opportunity cost 4

14. The Economic Problem The production possibility curve
what the curve shows
microeconomics and the p.p. curve:
choices and opportunity cost
increasing opportunity cost 4

15. Increasing opportunity costsx 1 y 1 2
Units of food (millions) z 1
Units of clothing (millions)

16. 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: 4

17. 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 4

18. Making a fuller use of resourcesx
Production inside
the production
possibility curve y
Food v O
Clothing

19. 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 4

20. Growth in potential output
Food
Now O
Clothing

21. Growth in potential output
5 years’ time
Food
Now O
Clothing

22. Growth in potential and actual output
Food O
Clothing

23. Growth in potential and actual outputy x
Food O
Clothing

24. The Economic Problem
The circular flow of income
firms and households

25. The circular flow of goods and incomes

26. The Economic Problem The circular flow of income firms and households
goods markets
real flows: goods and services

27. The circular flow of goods and incomes

28. The circular flow of goods and incomes
Goods and services

29. The Economic Problem The circular flow of income firms and households
goods markets
real flows: goods and services
money flows: consumer expenditure

30. The circular flow of goods and incomes
Goods and services

31. The circular flow of goods and incomes
Goods and services
Consumer
expenditure

32. The Economic Problem The circular flow of income firms and households
goods markets
real flows: goods and services
money flows: consumer expenditure
factor markets

33. 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

34. The circular flow of goods and incomes
Goods and services
Consumer
expenditure

35. £ The circular flow of goods and incomes Goods and services Consumer
expenditure
Services of factors of production (labour, etc)

36. 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

37. £ The circular flow of goods and incomes Goods and services Consumer
expenditure
Services of factors of production (labour, etc)

38. £ £ The circular flow of goods and incomes Goods and services Consumer
expenditure
Wages, rent
dividends, etc.
Services of factors of production (labour, etc)

39. 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