Economic Development
1. Goals of Economics
 To strengthen economic freedom
This includes freedom
▪ of consumer choice
▪ of occupational choice
▪ to consume or save
▪ of enterprise
 Promote Economic Stability
-Stability means there is no violent
ups and downs in the economy
 To attain a high level of growth in the
economy
Assurance of economic growth and innovation.
Innovation leads to growth. Growth leads to
higher standard of living
2. 10 Economic Principles to follow.
How People Make Decision
▪ People face trade- offs
▪ The cost of something is what you give
up to get it
▪ Rational people think at the margin
▪ People respond to incentives
How People Interact
▪ Trade can make everyone better off
▪ Markets are usually a good way to
organize economic activity
▪ Government can sometimes improve
market outcomes
3. Economic Systems and Types of
Economic Systems
An economic system, or economic order, is a
system of production, resource allocation and
distribution of goods and services within a
society or a given geographic area.
 Promote Economic Efficiency
-making most out of the resources
available
 Promote Economic Security
Our government is providing us
economic security.
-by keeping the unemployment at low
level
-by ensuring price stability to control
inflation
-by enforcement of contracts
-by preservation of environment
There should have an assurance that
goods and services will be available,
payments will be made and a safety net
will assist in case of disaster.
How the Economy as a Whole Works
▪ A country’s standard of living depends
on its ability to produce goods and
services
▪ Prices rise when the government prints
too much money
▪ Society faces a short-run trade off
between inflation and unemployment
ECONOMIC SYSTEMS
▪ Traditional Economic System - a system that
relies on customs, history, and time-honored
believes. traditional economies depend on
agriculture, fishing, hunting, gathering, or some
combination of them.
▪ Command Economy -one in which the central
government plans, organizes, and controls all
economic activities to maximize social welfare.
▪ The Market System/Free Enterprise - refers
to an economy where the market determines
prices, products, and services rather than the
government. Businesses and services are free of
government control.
▪ The Mixed economy - a market system of
resource allocation, commerce, and trade in
which free markets coexist with government
intervention.

4. Circular Flow Diagram

The circular flow diagram demonstrates
how money moves from producers to
households and back again in an endless loop.
In an economy, money moves from producers
to workers as wages and then back from
workers to producers as workers spend money
on products and services.