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University of Toronto St. George

ECO100Y1a.doc Lecture #1 Tuesday, September 8, 2003 B IGQ UESTIONS N E CONOMICS What? What goods and services are to be produced? Where do resources go? How? 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, GDPcapita stability inflation, exchange rate, balance of trade S YSTEMS 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 Mix System government intervention is beyond the market system P RODUCTION P OSSIBILITY C URVE (PPC) Assumptions only two goods are produced: guns and butter fixed resourcesinputscapitaltechnology efficient Page 1 of 18 ECO100Y1a.doc linear transformation is constant A C unobtainable 10 D underutilization, unemployment C G E full employment G to H sacrificed 2 butters for 1 gun Butter 2 opportunity cost (Million Cases) H 1 E D Guns 5 (Million Crates) non-linear hard to transform from butter to gun 1 5 Butter (Million Cases) 5 1 Guns (Million Crates) Lecture #2 Monday, September 15, 2003 M ARKET E CONOMY Households $ sales $ purchases inputs G & S For Input Output Whom? Markets Markets What? inputs G & S $ purchases Firms $ sales How? Page 2 of 18
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