Textbook Notes (362,734)
Canada (158,032)
Economics (380)
ECO100Y5 (285)
Michael H O (131)
Chapter 1

ECO100Y5Y Chapter 1 Notes.docx

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University of Toronto Mississauga
Michael H O

Page 1 of4 Chapter 1 Notes Four Worldwide problems - Productivity Growth o Is a measure of how much output (income) is produced by one hour of work o Has been rising gradually over past century o Recent years, has been slowing down in Canada - Population Aging o Average age of Canadian pop. is rising o Decline in growth rate of Canada’s labour force o Wages will rise as a result o Increase in tax - Climate Change o Presents a challenge for better economic policy - Global Financial Stability o After recession, it was clear that governments needed to play a role in redesigning financial systems to reduce likelihood of similar events - Rising Government Debt o Increased after recession (2008 – 2012) - Globalization o International trade and ongoing process of globalization are crucial to economic prosperity What is Economics? - The study of the use of scarce resources to satisfy unlimited human wants Resources - Land; natural endowments, arable land, forests, lakes, crude oil, and minerals - Labour; all mental and physical human resources, entrepreneurial capacity and management skills - Capital; all manufactured aids to production, tools, machinery, equipment, and buildings - Factors of Production: resources used to produce goods and services; frequently divided into land, labour, and capital - Goods are tangible (cars, shoes, etc.) - Services are intangible (haircut, education, etc.) - Production is the act of making goods or services - Consumption is the act of using them to satisfy wants Scarcity and Choice - All societies face problem of deciding what to produce and how much each person consumes - Scarcity implies need for choice, choice implies existence of cost - A decision to have more of one thing requires decision to have less of another o The less of “another” can be the opportunity cost - Opportunity Cost; the cost of using resources for a certain purpose, measured by the benefit given up by not using them in their best alternative use - Every time a choice is made, opportunity costs are incurred - Ex. Resources that could have produced 20 km of road used to make one hospital; opportunity cost of hospital is 20 km of road / opportunity cost of 20 km of road is one hospital Page 2 of4 - Production Possibilities Boundary; illustrates three concepts (scarcity, choice, and opportunity cost). Scarcity shown by unattainable combinations; choice, by need to choose among attainable points along boundary; opportunity cost, by negative slope of boundary. - Negative slope because producing more of one good requires producing less of others Four Key Economic Problems - What is produced and how? o Concerns allocation of scarce resources o Resource Allocation; allocation of an economy’s scarce resources among alternative uses o Determines the quantities of various goods that are produced - What is Consumed and by whom? o Economists seek to understand what determines the distribution of a nation’s total output o Who gets more, who gets less o Should governments care about the distribution - Why are resources sometimes idle? o People without jobs, or factories/companies that need more workers o Results in wastage o Points inside the PPB - Is productive capacity growing? o Can be represented by an outward shift of the PPB o If capacity is growing, unattainable points become attainable in future Economics and Government Policy - Mic
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