- the extent to which governments should intervene in the allocation of resources
- the threat to sustainability as a result of the current patterns of resource allocation
- the extent to which the goal of economic efficiency may conflict with the goal of equity
- the distinction between economic growth and economic development.
Over the course of studies we will focus on some central themes:
Utility is the satisfaction that we get from consuming an item. Marginal utility is the additional satisfaction we get from consuming one more (additional) item. The theory of diminishing marginal utility states that as we consume more of a product, marginal utility will decrease, i.e. the first unit consumed will yield more satisfaction than the second which will yield more satisfaction than the third.... and so on. Rational consumers will seek to maximise their total utility.
Economic theories are based on rational economic decision-making, i.e. economic decision-makers will act in their best self-interest. We assume that consumers will seek to spend their money in such a way as to maximise their total utility. Producers will seek to maximise their profits.
The thing is, people are not always rational!
• Explain that as a result of scarcity, choices have to be made.
• Explain that when an economic choice is made, an alternative is always foregone.
• Explain that a production possibilities curve (production possibilities frontier) model may be used to show the concepts of scarcity, choice, opportunity cost and a situation of unemployed resources and inefficiency.
Link to presentation
You will be given a number of worksheets to complete.
Some extra reading here:
What might the video imply about the economic problem?
Download a copy of the following glossary template linked here and write definitions of the words we have used so far, i.e. everything to and including 'Marginal utility'. Use your textbook for the definitions... never just Google it as you need to learn proper IB definitions!! Soon you will have a 10 word vocabulary test (formative).
After you finish that, write a paragraph explaining the economic problem and the three questions which need to be answered by any economic system.
Link to Worksheet
The following document is about the difference between positive and normative statements... read it and do the quick exercise at the end.
So what is Economics all about... listen to the song and then watch the YouTube clip...
The song and video are based on Greg Mankiw's 10 Principles of Economics... but what does each statement mean? Discuss with a partner.
How People Make Decisions
How the Economy Works as A Whole
How People Interact