GEOG 1HB3 Lecture Notes - Planned Economy, Mixed Economy, Opportunity Cost
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LECTURE 1 Sep/12/2012 – Chapters 1, 2 (partial) Basic Principles and Glossary of Terms for
I’D LIKE TO KNOW…
-What is this course all about?
-Why do I have to make choices?
-What does it really cost me to come to Mac?
WHAT IS ECONOMICS?
What is Economics?
-Economics: Study of how society allocates scarce resources to satisfy people’s unlimited wants.
-Scarcity: Society has limited resources and therefore can’t produce all the goods + services people wish
-Microeconomics: focus on individual parts of the economy. How households + Firms make decisions+
how they interact in specific markets.
-Macroeconomics: The economy as a whole. E.g.: inflation, unemployment, economic growth.
-Market Economy: allocates resources through the decentralized decisions of firms + households.
Households decide what to buy, and who to work for. Firms decide who to hire, and how much to
-Command or centrally planned economy: all production and distribution decisions are made by a
central authority, like a government. E.g.: former USSSR.
-Traditional Economy: Economic decisions are based on customs, beliefs, region, and habits. Term is
often used to refer to underdeveloped economies that rely heavily on agriculture for domestic
consumption (subsistence economy).
-Mixed Economies: combination of market and command economies. Canada is a mixed economy.
Mostly free market. *Crown Corp.
BASIC PRINCIPLES OF ECONOMICS
-A household and an economy face many decisions: 1) Who will work? , 2) What goods and how much
will be produced?, 3) What resources should be used in production?, 4) At what prices should goods be
Every economic issue involves individual choice.
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