Page 1 of 18
Lecture #1 – Tuesday, September 8, 2003
BIG QUESTIONS IN ECONOMICS
• What goods and services are to be produced?
• Where do resources go?
• How will goods and services be produced?
• Lots of workers and few machines? Lots of machines and few workers?
• Mass production or customized?
• When do goods and services get produced? – weather limitations
• Where do goods and services get produced?
• For whom?
• Who gets the goods and services produced? – distribution
Objectives For An Economy
• equity – “fair”
• efficiency – scarcity of resources
• full employment
• growth – GDP, GDP/capita
• stability – inflation, exchange rate, balance of trade
Market Based System
• market – where buyers and sellers interact
• equilibrium between buyers and sellers determines what gets produced, prices, etc…
• money – medium for exchange
• government provides framework for this to operate in a mannerly fashion – law
Command Based System
• central authority determines what gets produced, quantity, price, where labourers work
• no competition – not efficient
• government intervention is beyond the market system
PRODUCTION POSSIBILITY CURVE (PPC)
• only two goods are produced: guns and butter
• fixed resources/inputs/capital/technology