Lesson 1: Economic Basics (Sept 8)

• Defining economics
  • Economics is a social science about how ppl choose alternatives
  • Involves ppl and behaviours
  • Science because it uses a scientific approach
• Good and services
  • Goods - concrete things that you can touch, see consume and will last a long time
  • Service - things that cannot be touched but will satisfy a want or need
  • Attending a Jays game is a service and buying a Jays hat is a good
• Needs and wants
  • Needs - the goods or services we must have to service
  • Wants - the goods and services that are not required but we would like to have
  • Some of these needs are influenced by climate and society (in Canada we need winter coats, and pools we don't)
• Scarcity and choice
  • All choices mean that one alternative is selected over another
  • Selecting among alternatives involves three ideas central to economics: scarcity, choice and opportunity cost
• Scarcity: Anything in limited supply, our resources are limited, the condition of having to choose among alternatives. But our wants are things that are made in large quantities, making them unlimited
• Factors of production

1. Natural resources
2. Capital resources
   1. Real assistance of a company, equipment, buildings, machinery and tools used in production
3. Human resources
   1. 2 main types used in production, labour and entrepreneurship
   2. Labour is a human effort
   3. Entrepreneurship is initiative, risk-taking and innovation necessary for production

• Opportunity cost
  • One of the most important concept
  • The value of the alternative that had to be given up in making uo that choice
  • Every choice has an opportunity cost and opportunity costs affect the choices people make
  • Opportunity cost costs are not measured in terms of money but in terms of utility or happiness (The goods that you gain from giving something up)
• Economics
  • How society distributes its scare/limited resources
  • The social science that deals with the production, distribution nd consumption of goods and services
• Microeconomics
  • Decisions of people and businesses
  • Focuses on supply and demand and other forces that determine the price levels seen in the economy
• Macroeconomics
  • A more wide range view of the economy
  • Studies the behaviour of the economy as a whole not just specific companies/individuals
  • Look at the unemployment rate, growth rate, inflation, GDP, minimum wage, money supply
• Mico vs Macro
  • Appear different but are overlapping
  • EXE, increased inflation (Macro) would cause the price of raw materials to increase for companies and in turn affect the end products price changed to the public (micro)
• Facts - Positive analytical economics
  • A fact that can be verified statistically
  • EXE, Auto sales in Canada in this quarter are 7% higher than in the last quarter
• Values - Normative policy economics
  • Express what someone thinks should be the case based on their valued judgment
  • This statement cannot be confirmed or refuted solely by reference to facts
  • Opinion rather than a fact
  • EXE, I believe women do not get paid the same as men
• 3 main questions of economics

1. How should goods and services be produced
2. For whom should goods and services be produced
3. What goods and services should be produced

Lesson 2: GDP

• What is GDP
  • Gross domestic product
  • Total value of all final goods and services produced within a country in one year
  • Used to compare countries' standards of living which is the quality and quantity of goods and services that people are able to obtain to accommodate their needs and wants
  • Calculated by
    • The expenditure approach
    • The income approach
• Expenditure Approach
  • Add up the total spent o\n goods and services
  • GDP = C + G + I + (X-M)
  • C - Consumption (what households spend)
  • G - Government (anything the government spend money on)
  • I - Investment (process by business or something that is bought and used for a long time)
  • X-M - exports-imports
• Income approach
  • Add up all of the income that is earned by the different factors of production
  • (Wages, rent, interest, profit)
• Drawbacks to GDP

1. Population size might be misleading
   1. Using GDP/population solves this issue
2. Non-market production
   1. GDP does not count output that does have a dollar value attached to it
3. Underground economy
   1. Illegal transactions are not factored in
   2. The underground economy could add 3-20% if value to the GDP
4. Types of goods produced
   1. The inclusion of all types of goods and services may not strengthen our economy (guns, policing riots)
5. Leisure
6. Environmental deregulation
   1. GDP does not take into account thw negative effects of production
7. Distribution of income
   1. GDP does nto take into account how evenly the income in a country in distribution
   2. EXE. the 1% of people have the most amount of money, but it doesnt balance out

Lesson 3: The Production possibilites model (curve)

• An economy makes only 2 products
• Resources ad technology are fixed
• All resources are employed to their fullest capacity
• The production possibilities curve shows a range of possible output combinations for an economy
• Law of increasing opportunity cost
• Law of increasing/relative opportunity cost
  • Concave shape of PPC demonstrates the effects of the law of increasing opportunity cost
  • Hapens due to lack of specialization
• Economic growth
  • Occurs when the production possibilities curve shifts outwards due to more resources oe an improvement in technology
  • The economy moves from a point within the area bounded by the production possibilities curve to the curve itself
• The business Cycle
  • Covers periods of economic growth and recession
  • Measured bu changes in GDP
• Stages of business cycle
  • Boom
    • Hgh levels of consumer spending, business confidence, profits and investment. Price and costs also tend to rise faster. Unemployment tends to be low
  • Recession
    • Falling levels of consumer spending and confidence mean lower profits for business-which start to cut back on investment, spare capacity increases+rising unemployment
  • Slump/depression
    • Very weak consumer spending and business investments; many business failure;rapidly rising unemployment; prices may start falling
  • Recovery
    • Things start to get better; consumer begins to simcrease spending; businesses feel a little more confident and start to invest gainl; but it takes time to lesser unemployment

Unit 1 Activity 5 Financial planning

• Savin and investing
  • Saving - putting money aside for future use
  • Investing - using savings to earn extra income