What to produce
– less oil-intensive products
How to produce
– less oil-intensive techniques
For whom to produce
– oil producers have more buying power, importers have less
Production possibility frontier
Film output
1.6
The operation of markets
Market
– a shorthand expression for the process by which
– households’ decisions about consumption of alternative goods
Models and data
Model
– a framework based on simplifying assumptions
– helps to organize our economic thinking
Opportunity cost a crucial concept in economic analysis the quantity of other goods that must be sacrificed to obtain another unit of a good
1.5
Food output
1.8
Market orientation
China Sweden
Hungary Cuba
UK
USA Hong Kong
Command economy
Free market economy
1.9
Normative and Positive Economics
Positive economics deals with objective explanation
The production possibility frontier
For each level of the output of one good, the production possibility frontier shows the maximum amount of the other good that can be produced.
1.10
Micro and Macro
Microeconomics
– offers a detailed treatment of individual economic decisions about particular commodities
Macroeconomics
– emphasizes the interactions in the economy as a whole
Tripled in 1973-74, and doubled again in 1979-80 … and affected people all over the world.
40 35 30 25 20 15 10 5 0
1.2
An increase in the price of oil affects
– firms’ decisions about what and how to produce
– and workers’ decisions about how much and for whom to work
are allnt of prices
1.7
Resource allocation
Resource allocation is crucial for a society and is handled in different ways in different societies, e.g.: – Command economy – Mixed economy – Free market
1.11
Chapter 2
The tools of economic analysis
David Begg, Stanley Fischer and Rudiger Dornbusch, Economics, 6th Edition, McGraw-Hill, 2000
Power Point presentation by Peter Smith
Chapter 1
Economics and the Economy
David Begg, Stanley Fischer and Rudiger Dornbusch, Economics, 6th Edition, McGraw-Hill, 2000
Power Point presentation by Peter Smith
1.3
The distribution of world population and GNP, 1998
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Population
LIC MIC HIC
GNP
1.4
Scarcity forces choices to be made
– e.g. if a tax is imposed on a good its price will tend to rise
Normative economics offers prescriptions based on value judgements
– e.g. a tax SHOULD be imposed on tobacco to discourage smoking
What is Economics?
ECONOMICS ... is the study of how society decides:
– What – For whom – How
to produce...
1.1
US$ per barrel
1965 1975 1985 1995
The price of oil