Economics for south african students
chapter 3:
The circular flow of economic activity
ECON-1
What do we know about economics?
They are also the owners of scarce resources
Capital Labour
Natural
resources
Entrepreneu...
There is a circular flow of activity
Households
consume
goods and
services to
satisfy wants /
needs
Households own
the fac...
There is a circular flow of activity
Buys g+s to
consume
Offer CLNrE
Offer g+s
CLNrE
Receive
Interest,
Wages,
Rent,
Profit...
There is a circular flow of activity
More about the households:
lDescription
lConsume to max utility
lDetermines WHAT is p...
There is a circular flow of activity
More about the firms:
lDescription
lProduce for max profit
lDetermines HOW to produce...
Production income and spending
There are 2 flows /
activities:
• Production
• Income and
• Spending
The values of the 3 fl...
The circular flow and the government
Government
• Definition
• What is the primary function of the
government?
• How does ...
The government
The circular flow and the rest of the world
Foreign sector
• Definition
• SA is an open economy
• Transactions are recorde...
The foreign sector
The circular flow and the financial sector
Financial sector
• Definition
• The financial sector is the links beteen
surplu...
Financial institutions
The key elements of the
circular flow
Did we achieve the
outcomes?
Can you explain and draw the three flows in the economy?
Can you identify the key role player...
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Intro to ECON_Chapter 3

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Here are the slides used in the contact sessions and voice-over PPT lecture video's. Watch the video on YouTube and then use your textbook to supplement the slides to make your own set of notes.
Chapter 3 deals with the circular flow of economic activity.

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Intro to ECON_Chapter 3

  1. 1. Economics for south african students chapter 3: The circular flow of economic activity ECON-1
  2. 2. What do we know about economics? They are also the owners of scarce resources Capital Labour Natural resources Entrepreneurship Individuals / households have unlimited wants Scarcity means that choices have to be made When you choose, there is opportunity cost
  3. 3. There is a circular flow of activity Households consume goods and services to satisfy wants / needs Households own the factors of production Market for factors of production Firms Use factors of production to produce goods and services Market for goods and services
  4. 4. There is a circular flow of activity Buys g+s to consume Offer CLNrE Offer g+s CLNrE Receive Interest, Wages, Rent, Profit Pays I, w, r, p Pays for g+s Payment for g+s Market for pf Firms Market for g+s Households
  5. 5. There is a circular flow of activity More about the households: lDescription lConsume to max utility lDetermines WHAT is produced lRole: ¡Income ¡Spending lIs the C in total demand
  6. 6. There is a circular flow of activity More about the firms: lDescription lProduce for max profit lDetermines HOW to produce lRole: ¡Income ¡Spending lIs the I in total demand
  7. 7. Production income and spending There are 2 flows / activities: • Production • Income and • Spending The values of the 3 flows should always be equal
  8. 8. The circular flow and the government Government • Definition • What is the primary function of the government? • How does the government participate in the circular flow? • Income (T) • Expenditure (G) • Transfer payments • Leakage or injection into production and spending?
  9. 9. The government
  10. 10. The circular flow and the rest of the world Foreign sector • Definition • SA is an open economy • Transactions are recorded in the balance of payments • How does the foreign sector participate in the circular flow? • Exports (X) • Imports (Z) • Leakage or injection into production and spending?
  11. 11. The foreign sector
  12. 12. The circular flow and the financial sector Financial sector • Definition • The financial sector is the links beteen surplus and deficits of funding – participates in the circular flow: • Savings (S) • Investment (I) • Leakage or injection into production and spending?
  13. 13. Financial institutions
  14. 14. The key elements of the circular flow
  15. 15. Did we achieve the outcomes? Can you explain and draw the three flows in the economy? Can you identify the key role players and describe them? Can you describe the two types of markets? Can you draw the circular flow of economic activity? Chapter 3 in Mohr & Fourie eFundi Answer the Quiz questions Follow @ekonoom

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