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Webinar 1 Economics 1A 18 March 2023

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21 views25 pages

Webinar 1 Economics 1A 18 March 2023

Uploaded by

Boom Squad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Resources (Books)

Prescribed Reading/Textbook
 Mohr, P. & Fourie, L. (2020). Economics for South
African Students. (6th edition) Pretoria: Van Schaik

 Module guide

 Workbook Economics 1A and 1B


LEARNING OUTCOMES UNIT 1 – UNIT 2

 Explain what Economics is all about.


 Macroeconomics Versus Microeconomics
 SCARCITY, CHOICE AND OPPORTUNITY COST
 The Production Possibility Curve
 Improved techniques or increased resources
WHAT IS ECONOMICS ?

Economics is the study


of how societies use
scarce resources to Economics is the study
produce valuable of how society
commodities and manages its scarce
distribute them among resources
different people. –Paul
Samuelson
Economics is the study
how scarce resources
are allocated among
different uses – Richard
Eckhaus
MICROECONOMICS VERSUS MACROECONOMICS

Microeconomics - the • Individual consumers


focus is on individual
parts of the economy • Individual firms
MICROECONOMICS VERSUS MACROECONOMICS

• is concerned with the economy as a


Macroeconomics whole

• Economic growth
• Aggregate unemployment
The emphasis is on • Inflation and
topics such as; • The balance of payments.
• Redistribution of Income
MICROECONOMICS VERSUS MACROECONOMICS EXAMPLES
Take note of some of the following examples:
MICROECONOMICS MACROECONOMICS
The price of a single product The consumer price index (group of products, show calc)

Changes in the price of a product e.g. mangoes Inflation (i.e. the increase in the general level of prices in
the country)

The production of wheat The total output of all goods and services in the economy

The market of individual goods e.g. grapes The market for all goods and services in the economy

The demand for a product e.g. maize The total demand for all goods and services in the
economy

An individual’s decision to export its product The total exports of goods and services to other countries

A firm’s decision to import from abroad The total imports of goods and services from other
countries
SCARCITY AND THE FACTORS OF PRODUCTION

Needs – necessities Wants – human desires

The Economic Problem of Scarcity

People’s unlimited wants cannot be met with the limited resources


available, as such choices need to be made. But what are these
resources which are in limited supply?
SCARCITY AND THE FACTORS OF PRODUCTION
Factors of production – scarce resources that are used to produce goods
and services

 Natural resources (land)


 Labour
 Capital
 Entrepreneurship
SCARCITY AND CHOICES

Scarcity: The state in which the resources available are insufficient to satisfy
people’s wants.
 Since the factors of production (resources) used in the production of goods and
services are limited, it follows that the goods and services which can be
produced with them are also limited.

 Therefore we have to make choices.


 Because of scarcity, choices have to be made

 e.g. David has R50 in his pocket. R50 is the resource. He therefore has to
choose what to buy and what to sacrifice.
OPPORTUNITY COST

The opportunity cost of a choice is the value to the decision maker of


the best alternative that could have been chosen but was not chosen.

In other words, the opportunity cost of a choice is the value of the
best forgone opportunity.

For example, if Jack has to choose between studying and going to the
movies, the opportunity cost of studying would be the visit to the
movies that he has to forgo.
SCARCITY, CHOICE AND OPPORTUNITY COST

Needs – necessities
Wants
Wants –– human
human desires
desires

Choice: The act of making a

Scarcity - The state in which decision between two or

the resources available more possibilities.

are insufficient to satisfy

people’s wants.
Opportunity cost: The cost of the

alternative chosen in terms of the

other alternatives sacrificed.


What is it that you don’t understand?
The fundamental problem in economics
is...

ⓘ Start presenting to display the poll results on this slide.


CLASS EXERCISE 2:

Indicate whether the following statements is true or false:

a. Scarcity is a problem in poor households only.


b. The economic problem of scarcity arises because needs and wants are
unlimited and the resources (or means) to fulfil these wants are limited.
c. The economic problem of scarcity can be solved by increasing the
productivity of resources.
CLASS EXERCISE 3:

James works as a consultant and earns R500 per hour. It is Saturday, and he
decides to attend a soccer league match instead of working. The cost of the
soccer match is R250 and it takes up two hours of his time.
His opportunity cost to attend the soccer match is

a. R250 for the soccer match


b. R1 000 he could have earned working
c. R1 250, which is the cost of the attending the soccer match, plus the lost
earning of R1 000
PRODUCTION POSSIBILITY CURVE (PPC)

Scarcity, choice and opportunity cost can be illustrated with the aid of a
production possibilities curve

The production possibilities curve: An illustration of the combination of any two


goods or services that are attainable when a community's resources are fully
and efficiently employed (in other words, the maximum attainable
combinations of those two goods
PRODUCTION POSSIBILITY CURVE
Figure 1-1 A production possibilities curve for the Wild
Table 1-1 Production possibilities for the Wild Coast
Coast community
community

The production
possibilities
curve is a very
useful way of
illustrating
scarcity, choice
and opportunity
cost.
PPF AND OPPORTUNITY COST
What is the opportunity cost of increasing the production of laptops from
3 000 to 4 000 in terms of mobile phones?
UNIT 2

FURTHER APPLICATIONS OF THE PRODUCTION

POSSIBILITIES CURVE
UNIT 2: IMPROVED TECHNIQUE FOR PRODUCING

 Capital goods are goods that are used in the production of other
goods.

 Consumer goods are any goods that are not capital goods; they
are goods used by consumers and have no future productive
use.

 NB: Depends on their usage. E.g. A house could be used as a


capital good (run a business out of) or consumer good, as a
home
OUTWARD MOVEMENT OF PPC
Summary of factors

THREE factors that will cause the PPC to shift outward:


1. An increase in available resources
2. Improvements in current production techniques
(improved technology)
3. An increase in productivity levels
CLASS EXERCISE 4

Use the diagram, which indicates maximum combinations of good X and good Y that can be produced with
available resources, to answer the question. The outward shift of the curve from AC to BC could arise from

a) a decrease in the level of unemployment.


b) technological progress that affects good X
production and good Y production equally.
c) an improvement in labour productivity only in
the industry producing good X.
d) an improvement in labour productivity only in
the industry producing good Y.
CLASS EXERCISE 5

Use the following production possibility curve (PPC) of the


Land of Oz to answer the question. The Land of Oz can only
produce yellow bricks or tin. If the Land of Oz is currently on
PPC1, which of the following points will be possible to
achieve but an ineffective use of resources?
a) A
b) B
c) C
d) D
CLASS EXERCISE 6

Use the following production possibility curve (PPC) of the Land of


Oz to answer the question. The Land of Oz can only produce yellow
bricks or tin. If the PPC of the Land of Oz shifts from PPC1 to PPC2,
which point will be attainable that was previously impossible?
a) A
b) B
c) C
d) D

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