Professional Documents
Culture Documents
Chapter 1
2nd Canadian Edition
by Case, Fair, Strain, Veall
1 Copyright 2002, Pearson Education Canada 2 Copyright 2002, Pearson Education Canada
z Economics is the study of how individuals and z Economics is the study of how scarce resources
societies choose to use the scarce resources are allocated among conflicting demands.
that nature and previous generations have
provided.
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Opportunity Costs Question to Consider
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z In weighing the costs and benefits of a decision, z Prices, wages, and profits in market economies
it is important to weigh only the costs that are have the capacity to provide the information
contingent upon the decision. and incentives to coordinate the decisions of
individual decision-makers.
z Do not include sunk costs
y Sunk costs are the costs that cannot be avoided, z Are these market solutions always desirable?
regardless of what is done in the future, because y Perhaps not if they interfere with the public good,
they have already been incurred. and lead, for example, to poverty or environmental
degradation.
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z Present and past economic decisions have an z Impact of globalization, trade negotiations
enormous influence on the character of life in a z End of apartheid
society. z Gulf War
z The state of our physical environment, the level z Poverty and Starvation in Africa and Asia
of material well-being, and the nature and z The Asian Tigers
number of jobs are all products of the economic z The European Union
system. z Collapse of the Soviet Union
z NAFTA and the WTO
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4. To be an informed voter… The Scope of Economics
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economic behaviour of aggregates -- income, How much steel Price of gasoline industry Jobs in the steel industry
employment, output and so on... How many offices Food prices Minimum wages Number of employees in
How many cars Apartment rents Executive salaries a firm
Poverty Number of accountants
National Aggregate Price Level National Income Employment and
Production/Output Unemployment in the
Macroeconomics Consumer prices Total wages and salaries Economy
Total Industrial Output Producer Prices Total corporate profits
Gross Domestic Product Rate of Inflation Total number of jobs
Growth of Output Unemployment rate
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17 Copyright 2002, Pearson Education Canada 18 Copyright 2002, Pearson Education Canada
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Theories and Models Theories and Models - Pitfalls
1. Efficiency
z Empirical Economics y In economics, allocative efficiency. An efficient
y The collection and use of data to test economic economy is one that produces what people want and
theories. does so at the least possible cost.
2. Equity
y Equity means fairness, but what this means is open
to debate. Social programs and many policy debates
are centred on the issue of fairness.
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