Introduction Economic Issues The Economic Problem Economic problems

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

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

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 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 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