CIE3M1-01M. Nicholson

Resources & ProductionThe more numerous and better quality the

productive resources (human, capital, natural) the more effectively a country can deal with the problem of scarcity

Human, Capital, Natural Resources = Scarcity

Natural ResourcesAlso called “land” by economists it includes

minerals, forests, water and fish i.e. all “free gifts of nature”

Canada is 2nd largest country in the world, but only 7% of land is used for agriculture

Key crops are wheat, barley, corn and tobaccoBeef, pork and poultry products are also

important

Natural ResourcesMore than 33% of Canada forested world

leader in newsprint, lumber Fishing industry hard hit by depleted stocksCanadian Shield full of minerals such as nickelHuge reserves of coal, oil and natural gasLargest supply of fresh water in the world

Human ResourcesAlso called “labour” by economists this is the

most important resource in contributing to the wealth of a country because it can overcome the scarcity of the other resources most effectively

HealthEducationWork AttitudesPopulation Size

Capital ResourcesGoods used to produce other goods (e.g.

factories, machines, tools)Canada is a capital intensive economy because of

the small population and high wage ratesProducing capital goods requires sacrifice on the

part of a society because of the opportunity cost of consumer goods

Capital ResourcesProducing capital goods requires skill and

enough surplus resources to be able to make the sacrifice of consumer goods

Short term pain leads to long term gain as capital goods increase productivity and the standard of living with more goods and services produced for all to enjoy

ProductionAny economic activity that satisfies human

wantsAll productive activity divided into three

categories: primary (farmers, fishermen), secondary (autoworkers) and tertiary (teacher, salesperson)

Copyright © 2005 by McGraw-Hill Ryerson Limited. All rights reserved.

Production Possibilities Curve

Production Possibilities

Schedule

Hamburgers Computers point on graph

Production Possibilities Curve

0 1 2 3

1000

600

b

c

1000 0 a

900 1 b

600 2 c

0 3 d Computers

Ham

bur

gers

e

f

inefficient

unattainable

d

900

a

Copyright © 2005 by McGraw-Hill Ryerson Limited. All rights reserved.

The Law of Increasing Costs

Production Possibilities Schedule

Hamburgers Opportunity Computers point Cost of on graph Computers

Production Possibilities Curve

0 1 2 3

1000

6001000

0 a 100

900 1 b

300

600 2 c

600

0 3 d Computers

Ham

bur

gers

As the quantityof computers

rises, so does theiropportunity cost.

a

b900

c

d

Circular Flow Diagram