9 7 Resources should be used as efficiently as possible Resources are used

9 7 resources should be used as efficiently as

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7. Resources should be used as efficiently as possible • Resources are used efficien~ly if f1-0J oppo'tulllry i..> -tt:t./t.Q.,11. -t;,.o ~~Je pevpl.e be-tter 1f M~t rvrCAJcij titlljone., IM>r.st off . E.g. Ice cream cones - ...=.. / f.NO.$-tij re.>owa,5 7 If they do not belong to anyone, it would be efficient to allow people to eat them rather than letting them melt. 7 Even if just one person eats all three cones the situation is efficient. rvo oM I~ wa>tt 1f . 7 Efficiency is NOT improved by taking the ice cream away from someone. I Efficiency is not the same as equitv. J'Vio.rlf«" eM?M'Vlj -f-rci (,.TN-KAfM.J Uo _. eiu.J Generally t~~ tra~~b~tween efficiency and equity. E.g. disabled parking-not efficient because spaces are often empty, but they provide equal access for everyone. E.g. Taxes-take money from those who are producing consuming and fund social programs 7 ~uo.ll~ resvu~ J11w~·itrV\ ~ vli5c.ov<ytt~e,6 pwd«rJ:t'frY\ °",J C>11vtSIA4"110'1 10
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8. Markets usually lead to efficiency. Markets give people opportunities to 3~ ' Y\ -frv~ t;ro.k • People take advantage of al)_ o p~'-HeQ tA> ~a ~ e. tA.e-w-~(vel> reffM 4f The ref ore, i1-twtllets (;l$i<ct l~ , [ ea d to {j,Y\ e-ff1c1ecit aJ lo ( c..f[ Ph of ~ ,. C£6 . 9. Market failure can be helped by government intervention In some situations when individuals take advantage of opportunities to make themselves better off they make others - - ---. --- .... _ - worse off. --- ------ 0 This is called . Y1°'tk ~ t f ~1 re.. Example: Natural resources such as fish o If people could catch as many fish as they wanted to, some people would continue until there were no more fish! Example: Pollution o Polluters do not consider the costs of their actions. Governments can i ~ose.. q~ot-a~ (j~~ ' t:J c.? vi i-Yol ) priU>. von+wl $ or otkr t-etltrli~S ..-ho ~ f11ve_, SocAtM μlf u~ . 11
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Economy-Wide Interactions 10. One person's spending is another person's income • To understand the economy's upturns and downturns, we need to know how production creates incomes ~ E.g. In 2008 the rele~sion began with the housing crisis Less new houses purchased = W) )tt(A?tt'~ MO.ck in bl.'\i (clf 11.J nol1'1s-i-~ .. ::;:...:;. '":.. :: :::.·~ · :.. ... · . . -:. ~ z . ::: .. ::: .. ::. - ::·:· ! ~i-'.i " .- .. , ~~~ ~ ~ ~~o=~ ~ Less goods and services purchased by larger section of the economy = le5~ inc.orne> Mf>.ol.e bj pe.vple. 4'-e ll: o)()d) Less goods and services purchased by builders = Le.M. 1'>t eo~ rnoh.. ~ p~l2. Sell; vvels . ..... continues until everyone is • This is why government intervention is necessary Clover"~e-nt (.01n (nae~ iM. ~ ome) ().,ttd <;purh·J . 12
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11. Spending can be more or less than the economies productive capacity • Expectations can create gaps between spending and production capacity 0 E.g. ixffof1of\ o<-lUH ~ r~rt.R.. Wo.flt'"t mow.. Joods ~ ik. et.ott0~ Ccv\ pro~ . Is bigger than so prices will If demand for all goods increases, t~ py0hc~rs ca~ ;n.c,ire~se pn~. 12. Government policies can change overall spending Government does a lot of spending in the economy, so .... If the economy is in a downturn, the government can spend more on education or healthcare, [J,,,\J.. rYl~),e,s The government can spend less if there is inflation, ~~ ~5~ '"'C.0~5. 1' ttt-eh11ZS . 13
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