Intro to ECON_Chapter 2.1

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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.
The first part of Chapter 2 deals with the question of WHAT to produce.

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Intro to ECON_Chapter 2.1

  1. 1. ECONOMICS FOR SOUTH AFRICAN STUDENTS CHAPTER 2: THE ECONOMIC PROBLEM PART 1: WHAT TO PRODUCE? ECON-1
  2. 2. ECONOMIC PROBLEM? When you consider the economic problem: •Scarcity •Choice •Opportunity cost It leads to 3 important questions: •WHAT to produce? •HOW to produce? •For WHOM to produce? Economic systems determine how society will answer these questions.
  3. 3. WHAT SHOULD BE PRODUCED… CONSUMER GOODS Used to satisfy needs Categories: Non-durable goods • Example Semi-durable goods • Example Durable goods • Example CAPITAL GOODS Used in the production of other goods Examples… Depreciation
  4. 4. WHAT SHOULD BE PRODUCED… FINAL GOODS Consumed by households and firms Examples… INTERMEDIARY GOODS Used as inputs in production Examples…
  5. 5. WHAT SHOULD BE PRODUCED… PRIVATE GOODS Consumed by households and firms Examples… PUBLIC GOODS Consumed by society as a whole Examples…
  6. 6. WHAT SHOULD BE PRODUCED… EKONOMIC GOODS Produced at a cost, using scarce resources Examples… FREE / COMMON GOODS Not scarce and has no price Examples…
  7. 7. WHAT SHOULD BE PRODUCED… HOMOGENOUS GOODS Are exactly the same Examples… HETEROGENOUS GOODS Differentiated in terms of quality, variety, brand Examples…
  8. 8. WHAT SHOULD BE PRODUCED… Possible? Impossible? Efficient? Inefficient?
  9. 9. WHAT SHOULD BE PRODUCED… Suppose this economy can produce two types of goods: 1.Consumer goods 2.Capital goods How would the PPC change if better techniques are developed to produce both these goods with the same resources? (i.e. PRODUCTIVITY INCREASES)
  10. 10. WHAT SHOULD BE PRODUCED IMPROVED TECHNIQUES FOR THE PRODUCTION OF CAPITAL GOODS On AB there is opportunity cost: If you want to produce more capital goods, you have to sacrifice some consumer goods. But if the production techniques for producing capital goods improve, you would be able to produce more capital goods while keeping the production of consumer goods unchanged
  11. 11. WHAT SHOULD BE PRODUCED… IMPROVED TECHNIQUES FOR THE PRODUCTION OF CONSUMER GOODS
  12. 12. WHAT SHOULD BE PRODUCED… IMPROVEMENT IN THE PRODUCTIVITY OF AVAILABLE RESOURCES
  13. 13. DID WE ACHIEVE THE OUTCOMES? Can you describe the different categories of goods and services and give examples? Can you draw a production possibilities curve that shows improvements in productivity and economic growth? Chapter 2 in Mohr & Fourie eFundi Answer the questions on Quiz Follow @ekonoom

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