Econ ppt 1


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Econ ppt 1

  1. 1. IB Economics Introduction Section 1
  2. 2. The Discipline of Economics <ul><li>What does economics study? </li></ul><ul><li>What methods does economics employ? </li></ul><ul><li>What approaches does economics take? </li></ul>
  3. 3. <ul><li>Economics is the study of how scarce resources are or should be used. </li></ul><ul><li>Triple A Interactive Text </li></ul>What is Economics?
  4. 4. Economics & the Scientific Method Keep it simple Ceteris Paribus (other things equal) Models are dynamic Refine theory
  5. 5. Approaches
  6. 6. Micro and Macro There are many overlapping issues.
  7. 7. Key Economic Concepts <ul><li>Scarcity </li></ul><ul><li>Utility and Marginal Utility </li></ul><ul><li>Opportunity Cost </li></ul><ul><li>Public Sector and Public Ownership </li></ul>
  8. 8. Scarcity Choices have to be made
  9. 9. Choices and Utility <ul><li>In making choices we aim to maximize our utility, our perceived satisfaction from consuming a good or service. </li></ul>
  10. 10. Marginal Utility <ul><li>Our perceived satisfaction from consuming one additional good or service </li></ul>
  11. 11. Marginal Utility of Bungee Jumping Number of Jumps
  12. 12. Opportunity Cost <ul><li>Opportunity cost is the value of the next best alternative forgone as the result of making a decision. </li></ul>
  13. 13. Private and Public Sectors
  14. 14. Rationing Systems <ul><li>1. Answering the Basic Economic Questions: </li></ul><ul><ul><li>What to produce? </li></ul></ul><ul><ul><li>How to produce? </li></ul></ul><ul><ul><li>For whom to produce? </li></ul></ul><ul><ul><li>2. Economic Systems </li></ul></ul><ul><ul><li>Market Economies </li></ul></ul><ul><ul><li>Command Economics </li></ul></ul><ul><ul><li>Mixed Economies </li></ul></ul>
  15. 15. Resources/Factors of Production
  16. 16. Resources/Factors of Production
  17. 17. Resources/Factors of Production
  18. 18. Payments for Resources
  19. 19. Basic Economic Questions
  20. 20. Market Economies In a market economy the forces of Demand and Supply determine resource allocation.
  21. 21. Market Economies
  22. 22. Command Economies In a command economy the the state determines resource allocation.
  23. 23. Command Economies
  24. 24. Mixed Economies In a mixed economy the forces of demand and supply and the state determine resource allocation.
  25. 25. Transition Economies
  26. 26. Free and Economic Goods
  27. 27. Economic Growth and Economic Development
  28. 28. Sustainable Development The environment is preserved for future generations.
  29. 29. Production Possibility Frontier (Curve) <ul><li>Economic model of total obtainable output </li></ul><ul><li>Shows how </li></ul><ul><li>opportunity costs determine economic choices </li></ul><ul><li>economic growth and development can be achieved </li></ul>
  30. 30. <ul><li>PPC of an economy producing computers and mobile phones </li></ul>A All resources are being used efficiently. The economy is allocating more resources to computers than mobile phones.
  31. 31. <ul><li>PPC of an economy producing computers and mobile phones </li></ul>B Resources are not being used efficiently.
  32. 32. <ul><li>PPC of an economy producing computers and mobile phones </li></ul>B Actual Economic Growth C
  33. 33. <ul><li>PPC of an economy producing computers and mobile phones </li></ul>C Not attainable given present Factors of Production
  34. 34. <ul><li>PPC of an economy producing computers and mobile phones </li></ul>E Shift of production from Computers to Mobile Phones D
  35. 35. <ul><li>PPC and Economic Development </li></ul>Shift of production to Public and Merit Goods e.g. hospital, school etc Y X
  36. 36. <ul><li>Increasing Opportunity Costs Figure 1 </li></ul>A B
  37. 37. <ul><li>Increasing Opportunity Costs Figure 2 </li></ul>A B C D
  38. 38. <ul><li>PPC and Economic Growth and Development </li></ul>Potential Growth achieved by changes in the quantity and/or quality of Factors of Production PPC1 PPC2
  39. 39. Resources <ul><li>Dan Ariely and Behavior Economics </li></ul>
  40. 40. Suggested Activities <ul><li>Keep a journal or maintain your own economics blog and through your writing apply your understanding of economics to the real world. </li></ul><ul><li>Get into the habit of reading about economics or watching the news to see how economic concepts and theories can help you make sense of major developments. You can make comments about articles and events on your blog or in your journal. This skill forms the basis of the Internal Assessment in IB Economics. </li></ul>
  41. 41. Assessment <ul><li>As Section 1 aims to introduce you to the concepts and theories you will meet later in the course, typical questions that test your understanding will be identified in the appropriate section. Topics not covered in depth later in the course include types of economies and the PPF (PPC). </li></ul><ul><li>Section 1 and Section 5 are the only sections that are identical for both SL and HL students. </li></ul>
  42. 42. Typical Questions <ul><li>Questions that ask you illustrate the key concepts of scarcity, opportunity costs and tradeoffs. </li></ul><ul><ul><li>Explain what is meant by a production possibility curve and use a diagram to help explain concepts of scarcity, choice and opportunity cost. </li></ul></ul><ul><ul><li>Using a production possibility curve, explain how the discovery of gold would effect an economy. </li></ul></ul><ul><ul><li>Explain the difference between a movement along an existing production possibility curve (PPC) and an outward shift in a production possible curve. </li></ul></ul>
  43. 43. Typical Questions <ul><li>Questions that ask you to explain the similarities and differences between various economies. </li></ul><ul><ul><ul><li>Explain the differences between free market economy and a planned economy. </li></ul></ul></ul><ul><ul><ul><li>Explain the economic consequences of a transition from a planned economy to a market economy. </li></ul></ul></ul>
  44. 44. Diagrams <ul><li>Section 1 does not have a great number of associated diagrams. </li></ul><ul><li>However you should know the following: </li></ul><ul><li>How the PPC illustrates opportunity costs, actual growth and potential growth in an economy. </li></ul><ul><li>PPCs curves that can distinguish between growth and development. </li></ul>