Professional Documents
Culture Documents
Part One:
It is obvious that fining polluters will not stop them from doing it!
It’s crazy; fishermen are catching large quantities of fish but have
to throw half of them overboard even though they are dead!
It’s unfair that there is only one firm I can buy this product. The
service is very expensive but I don’t have any choice.
In the space below, write down five questions or statements that you
think have something to do with economics.
1.
2.
3.
4.
5.
Now share your ideas with the rest of the class. Given the range of
comments and issues collected by the group could you now write down a
definition of what economics is?
My definition of Economics is
Part Two
The economy therefore is faced with three key questions that have to be
answered - irrelevant of the complexity of the economic system involved.
3. Who should get the resources that the economy has produced?
In the space below make a list of answers to these questions - think of the
answers in general terms rather than specifics, e.g. food, health, etc.
Having identified these key questions, now take them a stage further -
take one item from the list you have in Question 1 and break it down
further - for example, in health, should the resources allocated to this
area be spent on fertility treatment, heart disease, cancer treatment or
research into AIDS, etc?
You are now in a position where you have had to make decisions. In
doing so, there will inevitably be some sacrifice to be made. The sacrifice
is, for example, in deciding that cancer treatment is more important than
fertility treatment. You are making judgements; these judgements cannot
always be quantified to any great degree.
Questions
The diagram shows the possibilities for a hospital in the provision of two
treatments - one for cancer treatment and one for fertility treatment. The
points show the maximum amount of respective treatment that can
be given with existing resources (where the PPF intersects with the
horizontal and vertical axes). If all resources were devoted to fertility
treatment then Fo patients could be treated but the consequences of this
would be that there would be no funds available for cancer patients.
Conversely, if all resources were devoted to cancer treatment, Co patients
would get treated but, as in the first case, there would now be no funds
available for patients seeking fertility treatment.
SHIFTS IN THE PPC
An economy’s production is constantly changing. If its capacity to
produce goods and services increases, the production possibility curve
will shift outwards to the right.
Agricultural
Products
(million
tonnes)
Manufactured
Agricultural
Products
(million
tonnes)
Manufactured
Products
(million tones)
PPC AND OPPORTUNITY COST
This shows that as more of one good is produced the opportunity cost
rises.
AGRICULTURAL 0 1 2 3 4 5 6
PRODUCTS
MANUFACTURED 60 58 55 50 42 30 0
PRODUCTS
OPP COST ----
From the table, we can see that there are seven different combinations of
production that the economy can be at.
Let’s say that the economy is at the point where it produces (3, 50). If the
economy increases its food production to 4m tonnes, then due to
existence of finite resources, it can only produce 42m tonnes of
manufactured goods. Thus the economy gives up 8m tonnes of
manufactured goods.
WHEAT 0 1 2 3 4 5 6
LINSEED OIL 30 25 20 15 10 5 0
As you can see every time that the economy increases the tonnage of
wheat, it must give up 5 tonnes of linseed oil
Questions
1: What two conditions must hold for a point to be on the production
possibilities curve?