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Here are the slides used in the contact sessions and voice-over PPT lecture video's. Watch the video on YouTube and then use your textbook to supplement the slides to make your own set of notes. The first part of Chapter 2 deals with the question of WHAT to produce.
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ECONOMICS FOR SOUTH AFRICAN STUDENTS
CHAPTER 2:
THE ECONOMIC PROBLEM
PART 1: WHAT TO PRODUCE?
ECON-1
ECONOMIC PROBLEM?
When you consider the economic problem:
•Scarcity
•Choice
•Opportunity cost
It leads to 3 important questions:
•WHAT to produce?
•HOW to produce?
•For WHOM to produce?
Economic systems determine how society will answer these questions.
WHAT SHOULD BE PRODUCED…CONSUMER GOODS
Used to satisfy needs
Categories:
Non-durable goods
• Example
Semi-durable goods
• Example
Durable goods
• Example
CAPITAL GOODS
Used in the production of other goods
Examples…
Depreciation
WHAT SHOULD BE PRODUCED…FINAL GOODS
Consumed by households and firms
Examples…
INTERMEDIARY GOODS
Used as inputs in production
Examples…
WHAT SHOULD BE PRODUCED…PRIVATE GOODS
Consumed by households and firms
Examples…
PUBLIC GOODS
Consumed by society as a whole
Examples…
WHAT SHOULD BE PRODUCED…
EKONOMIC GOODS
Produced at a cost, using scarce resources
Examples…
FREE / COMMON GOODS
Not scarce and has no price
Examples…
WHAT SHOULD BE PRODUCED…
HOMOGENOUS GOODS
Are exactly the same
Examples…
HETEROGENOUS GOODS
Differentiated in terms of quality, variety, brand
Examples…
WHAT SHOULD BE PRODUCED…
Possible?
Impossible?
Efficient?
Inefficient?
WHAT SHOULD BE PRODUCED…Suppose this economy can produce two types of goods:
1.Consumer goods
2.Capital goods
How would the PPC change if better techniques are developed to produce both
these goods with the same resources?
(i.e. PRODUCTIVITY INCREASES)
WHAT SHOULD BE PRODUCEDIMPROVED TECHNIQUES FOR THE PRODUCTION OF CAPITAL GOODS
On AB there is opportunity cost: If you want to produce more capital goods, you have to sacrifice some consumer goods.
But if the production techniques for producing capital goods improve, you would be able to produce more capital goods while keeping the production of consumer goods unchanged
WHAT SHOULD BE PRODUCED…IMPROVED TECHNIQUES FOR THE PRODUCTION OF CONSUMER GOODS
WHAT SHOULD BE PRODUCED…IMPROVEMENT IN THE PRODUCTIVITY OF AVAILABLE RESOURCES
DID WE ACHIEVE THE OUTCOMES?
Can you describe the different categories of goods and services and give examples?
Can you draw a production possibilities curve that shows improvements in productivity and economic growth?
Chapter 2 in Mohr & Fourie
eFundi
Answer the questions on Quiz
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