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Economics concepts for grade 11 learners
This document provides an overview of key economic concepts for grade 11 learners. It begins with definitions of economics and microeconomics and macroeconomics. It then covers concepts like scarcity, resources, opportunity costs, and production possibility frontiers. It introduces the circular flow of economic activity and models of income and consumption. It discusses the basic economic problems of what, how, and for whom to produce. Overall, the document provides a comprehensive introduction to foundational economic ideas.
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Economics concepts for grade 11 learners
- 1. Xolisa S Mbobo Universityof Johannesburg Economics for Grade 11 Learners 1-1
- 2. ECONOMIC CONCEPTS ANDSYSTEMS Economic concepts 1-2
- 3. Lecture Plan What isEconomics? Scarcity Basic economic problems What are resources Production possibility analysis The circular flow of economic activity The interaction of the economic participants Economic model of income and consumption Economic policies 1-3
- 4. What is Economics? Economicsis the study of how people and society choose to employ scarce productive resources to produce goods and services and distribute them among various groups of society ECONOMICS Macroeconomics Microeconomics 1-4
- 5. Microeconomics vs. Macroeconomics Microeconomics= the study of individual, consumers, firms and industries It focuses on: (‘Micro’ = the ancient Greek word for ‘small’) The pricing and production decisions of industrial firms Consumer behaviour and The output and state of single industries Macroeconomics is concerned with how the economy functions as a whole (e.g. total income) (‘Macro’ is the Greek word for ‘large’) 1-5
- 6. Scarcity Every economy isendowed with what we call resources, which are inputs used in the production of goods and services for consumption to satisfy our needs and wants The basic economic problem of any society is the relative scarcity of resources in relation to the unlimited needs and wants of consumers 1-6
- 7. Resources Resources = Allinputs that can be combined in many different ways to produce goods and services of various types to help satisfy people’s unlimited needs and wants Often referred to as the factors of production Resources include land, capital, labour and enterprise 1-7
- 8. Land All natural resourcesand endowments Examples: Critical The soils, crops, minerals, forests, oceans resource for Australia (e.g. exports) least flexible resource Factor income: rent Abundant resource for Australia but an increasingly scarce resource for East Asian countries (e.g. Singapore) 1-8
- 9. Capital Any good orservice used to produce others (i.e. intermediate goods) e.g. factories, tools, machinery and equipment Most abundant factor for industrial countries (e.g. United States, Japan) Factor income: interest Note: Expenditure on capital is Investment 1-9
- 10. Labour Labour = Physicaland mental work of people, whether, skilled or unskilled Examples: mechanics, doctors, farmers, computer programmers Most flexible resource Most abundant resource in developing countries Factor income: wages 1-10
- 11. Enterprise Management (e.g. ownership,control and/or coordination) of the other three factors of production (entrepreneurship) Covers the various organisational skills of ‘entrepreneurs’ Example: business managers Factor income: profit 1-11
- 12. Characteristics of Resources Scarce Havealternative uses Limited, finite Quantity of resources Physical amount of resources available Affected by resource endowment and population Australia’s cropland is 463 000 sq. km, while Indonesia’s cropland is 324 000 sq. km Australia’s labour force is around 9–10 million people, while Indonesia’s workforce is over 90 million people (cont.) 1-12
- 13. Characteristics of Resources (cont.) Qualityof resources Affected by technology, education and training of workforce Land productivity (yield/ha) Productivity of resources Labour productivity (production per person) We achieve economic growth by increasing the quantity and/or quality of resources 1-13
- 14. Consumer Needs andWants Needs: those things necessary to human survival e.g. food, shelter Wants: goods/services desired by the consumer e.g. hi-fi, travel, luxury cars Characteristics: unlimited recurrent complementary NEED changeable WANT 1-14
- 15. Satisfying Needs andWants Production Distribution Consumption 1-15
- 16. Basic Economic Questions Scarcity Choicesmust be made 1. What To Produce? 2. How To Produce? 3. For Whom To Produce? 1-16
- 17. Opportunity Cost The BasicEconomic Problem of Relative Scarcity is illustrated by two concepts: Opportunity Cost, and The Production Possibility Frontier (PPF) Opportunity cost = The sacrifice (or alternative forgone) in choosing to satisfy one need or want rather than another Note: Situations where there is NO opportunity cost = free goods 1-17
- 18. Production Possibility Frontier(PPF) Theory A simplified economic model which portrays scarcity, choice and opportunity cost The Static Production Possibility Frontier Analyses the economy at a fixed point in time Is based on the following assumptions: There is a fixed quantity of resources The economy only produces two products Resources can be used interchangeably All resources within the economy are used Resources are used at maximum efficiency 1-18
- 19.
- 20. Maximum Output Levels ThePPF shows the maximum output of the economy If the economy devotes all of its resources to the production of VCRs it is able to produce 800 (+ zero tractors)—Production Possibility A Alternatively, if the economy chooses Production Possibility C it is able to produce 200 tractors and 400 VCRs 1-20
- 21. Opportunity Costs The PPFshows that to produce more of one product means producing less of another Opportunity costs of production can be measured e.g. if the economy moves from point C to D (along the PPF) it will produce an extra 100 tractors BUT 200 VCRs must be sacrificed Hence the opportunity cost is 200 VCRs 1-21
- 22. Points Outside theStatic PPF Points outside the PPF (e.g. X) are not possible using existing technology and resources A .X PPF B 1-22
- 23. Points Inside theStatic PPF PPF A At point Y, the economy is satisfying fewer needs and wants than is possible This is due to: Resources not being fully employed and/or Resources not being used in the most efficient way .Y B 1-23
- 24. The Dynamic PPFModel This model differs from the static PPF in that it incorporates changes over time It demonstrates the effect of changes in the quantity and quality of productive resources e.g. new resource discoveries, improvements in technology Changes in the quantity and/or quality of resources will SHIFT the PPF 1-24
- 25. Dynamic PPF A When thequality/quantity of resources increases (decreases), the economy can produce more (less) of both products and the entire curve will SHIFT outwards (inwards) 1-25
- 26. Note If the changein resources affects ONLY one product, the PPF will ONLY shift on one axis e.g.: A A OR B B 1-26
- 27. The Significance ofPPF Shifts Increased maximum output levels enable: 1. 2. higher levels of consumption greater satisfaction of consumer needs and wants Improvements in the quality of resources results in the more efficient use of scarce resources 1-27
- 28. Basic Economic Activities Production The use of economic resources in the creation of goods and services for the satisfaction of human wants. Consumption The using up of goods and services by consumer purchasing or in the production of other goods. Employment The use of economic resources in production; engagement in activity Income The Generation production of maximum amount an individual can spend during a period without being any worse off.
- 29. Two Economic Units Household Thebasic consuming unit. The basic producing unit. Firm
- 30. Stock and FlowVariables Flow A quantity measured over a particular period of time. Stock A quantity measured as of a given point in time. The concepts of stock and flow measurements are essential in understanding the economic variables of wealth and income. Wealth Anything of valued owned. It is a stock since it is what is owned at a particular time. Income The rate at which we earn money. It is a flow since income that is saved, increases the stock of wealth.
- 31. Economic Model ofProduction The Circular Flow of the Production Process ECONOMIC RESOURCES PRODUCING UNITS HOUSEHOLDS GOODS AND SERVICES
- 32. Circular Flow ofGoods Among Production Units RAW MATERIALS RAW MATERIAL FIRM INTERMEDIATE GOOD FIRM CONSUMERS INTERMEDIAT E GOODS FINAL GOODS FINAL GOOD FIRM
- 33. Interrelation Between Production Units& Households RESOURCES HOUSEHOLDS RAW MATERIAL FIRM RESOURCES INTERMEDIATE GOOD FIRM RESOURCES FINAL GOOD FIRM
- 34. Economic Model ofIncome and Consumption The Circular Flow of Goods and Income Among Producers & Households RESOURCES RAW MATERIAL FIRM MONEY PAYMENT FOR RERESOURCES RESOURCES MONEY PAYMENT FOR RESOURCES HOUSEHOLDS INTERMEDIATE GOOD FIRM RESOURCES MONEY PAYMENT FOR RESOURCES MONEY PAYMENT FOR PURCHASE OF FINAL GOODS FINAL GOODS FINAL GOOD FIRM
- 35. The Circular Flowof Income INCOME FLOW OF WAGES, INTERESTS, RENTS HOUSEHOLDS PRODUCING UNITS PURCHASES OF GOODS AND SERVICES
- 36. Circular Flow ofIncome Among Production Units MONEY PAYMENTS FOR RAW MATERIALS INTERMEDIATE GOOD FIRM RAW MATERIALS FIRM MONEY PAYMENTS FOR INTERMEDIATE GOODS FINAL GOOD FIRM MONEY PAYMENTS FOR FINAL GOODS HOUSEHOLDS
- 37. The Circular Flowof Output and Income Circular Flow of Physical Goods and Money Income Goods and Services Factors of Production (land, labor, capital, entrepreneur) Household Sector Business Sector Payments of Factors (rent, wages, interest, profit) Payment of Purchase of goods and services.
- 38. The Circular Flowof Goods & Income of Households & Firms with the Government & Foreign Countries GOVERNMENT Purchase of Goods Wages, Transfer Payments & Services Taxes Taxes Economic Resources Purchase of Goods & Services HOUSEHOLDS PRODUCING UNITS Income Payments of Wages, Rent, Dividends, & Interests Goods & Services Money Payments for Money Payments for Imports Exports FOREIGN COUNTRIES
- 39. Implications of the CircularFlow of Economic Activity 1. The goods, resources, and money payments will flow as long as households continue to consume, and as long as firms continue to produce. 2. That since goods and resources flow in exchange for payments, the rate of payments flow will in the end be the same. Money is the inducing factor, and the pillar of the price system. Without it, there is no price system.
- 40. Inflows and Outflows Outflows(factors that decrease the level of economic activity) Savings Taxes Import Outflows are difficult to control because they are dependent on income. When income increases, we expect savings, taxes, and imports to increase. Inflows (factors that increase the level of economic activity) Investment Government Spending Exports Inflows are easier to manipulate. The proper use of policy enables the government to encourage exports and investments and to increase its expenditures when it desires to expand the flow of economic activity.
- 41. Fiscal and Monetarypolicy Fiscal- the utilization of certain governmental activities and actions in the development and stabilization of the economy. Monetary- this pertains to the amount of money circulation or the money supply in our country.
- 42. Economic Policies Monetary policy Fiscalpolicy Affects the savings and investment. Controls taxes and government expenditures. Trade policy Affects a country’s exports and imports.
- 43. Elements of FiscalPolicy Taxation- means of obtaining revenue/s from government, as a means of transferring resources from private to public sector. Expenditure-means the amount of the expenses of the government to finance the goods and services they provide. Debt management- how government manage the debts in the country in various forms.
- 44. Public Finance Income- itis the financial resources that the government get from taxes and other revenues. Outgo- is the government’s expenditure of funds to finance the goods and services.
- 45. Public Finance 5 stepprocess the formulation of fiscal policy. The generation of revenue from taxation and other sources. The expenditure of funds through the national budget. Public borrowings accountability
- 46. References This presentation isa mashup of 3 different sources. They are: Cristabol M. Pagoso, Rosemary P. Dinio, and George. A Villasis . (2011). The circular flow of economic activity http://www.slideshare.net/dienshMBA/dmydocspatricelourdescollegepowerpointsecon1theci Accessed date: 05 March 2014 Faizan Chaudhry. (2011) Economic concepts and systems http://www.slideshare.net/HUKKAM/ch01-ppt-7484908 Accessed date: 05 March 2014 April Van Diwata. (2013) http://www.slideshare.net/FairywithBraces/fiscal-and-monetary-policy Accessed date: 05 March 2014 1-46
Editor's Notes
- #13 The Quantity of productive resources refers to the physical amount of resources available. It is affected by: resource endowment and population. The Quality of productive resources refers to the productivity of resources and is affected by: Technology, education and training of workforce. By increasing the quantity and/or quality of resources we achieve ECONOMIC GROWTH.
- #14 The Quantity of productive resources refers to the physical amount of resources available. It is affected by: resource endowment and population. The Quality of productive resources refers to the productivity of resources and is affected by: Technology, education and training of workforce. By increasing the quantity and/or quality of resources we achieve ECONOMIC GROWTH.