hkcee microeconomics
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HKCEE Microeconomics. Chapter 1: The Nature of of Economics. What is Economics?. The study of how men allocate l _________ resources to satisfy their u _____________ wants. W hat is Economics?. Want and Demand. Want: A desire A particular want can be perfectly satisfied Demand: - PowerPoint PPT PresentationTRANSCRIPT
F.4 Economics CH1-The Nature of Economics1
HKCEE HKCEE MicroeconomicsMicroeconomics
Chapter 1:
The Nature of
of Economics
F.4 Economics CH1-The Nature of Economics2
What is Economics?
The study of how men allocate l_________ resources to satisfy their u_____________ wants.
F.4 Economics CH1-The Nature of Economics3
What is Economics?
F.4 Economics CH1-The Nature of Economics4
Want and Demand
Want:– A desire– A particular want can be perfectly satisfied
Demand:– Want + p_________________ power
F.4 Economics CH1-The Nature of Economics5A want A demand
Want or Demand?
F.4 Economics CH1-The Nature of Economics6
Scarcity and Opportunity Cost
Unlimited wants Limited resources
scarcity
choice
Opportunity cost (OC)
F.4 Economics CH1-The Nature of Economics7
Remarks on Scarcity
Scarcity is a r______________ concept Scarcity exists when limited resources are
insufficient to satisfy all unlimited wants Scarcity is simply a condition that we want
more than we have Scarcity is a universal problem Scarcity can be reduced but not be eliminate
d
F.4 Economics CH1-The Nature of Economics8
Is Sea Water Scarce?
No! Because we do NOT want more than we have.
Exercise 1: TB/P.3/MCQ 1Exercise 2: TB/P.4/Q 1.1Exercise 3: TB/P.5/MCQ 2
F.4 Economics CH1-The Nature of Economics9
Opportunity Cost (OC)
OC is the h_____________ valued (or best) option f_____________
We choose the highest valued/best option and forgo the second best option, which becomes our OC in a making decision
Exercise 4: TB/P.7/MCQ 3
F.4 Economics CH1-The Nature of Economics10
Opportunity Cost (OC)
What is OC for Dorothy to choose the doll?
F.4 Economics CH1-The Nature of Economics11
Opportunity Cost (OC)
Full cost
= out-of-pocket cost + income forgone
= explicit cost + implicit cost
Closer Look: TB/P.9/1.4
F.4 Economics CH1-The Nature of Economics12
The Case
Explanation
Consolidation Exercise (M.C)
Case Study
F.4 Economics CH1-The Nature of Economics13
Case Study
Romeo & Juliet: A Dilemma
F.4 Economics CH1-The Nature of Economics14
.
.
我是陳大文,行年廿九歲,尚未取妻。由於我是一間上市公司的主席,所以根本沒有時間結識女朋友。我阿媽就好心急,成日想我早D結婚。
F.4 Economics CH1-The Nature of Economics15
我已經幫你安排了三個女仔同你相睇。你快D睇下鍾意邊個...
阿媽好想抱個孫仔
F.4 Economics CH1-The Nature of Economics16
F.4 Economics CH1-The Nature of Economics17
哇!!!是神仙下凡嗎???
阿仔,呢位就係我所講的朱咪咪小姐
F.4 Economics CH1-The Nature of Economics18
有著我便有著你,千個萬個世紀..愛是永恆,當所愛是你...
F.4 Economics CH1-The Nature of Economics19
阿媽!我得O左啦!!!
F.4 Economics CH1-The Nature of Economics20
Wants
Desires for things Unlimited
In this case, wants may include:– To have a girlfriend– To be successful in his job– To have leisure time
F.4 Economics CH1-The Nature of Economics21
Resources
Things that used to satisfy our wants Types:
– Natural resources– Human resources– Man-made resources
In this case, resources may include:– Money & time
F.4 Economics CH1-The Nature of Economics22
Scarcity
We want more than we have
Unlimited wants Limited resources
To have a girlfriend;
To be successful in his job;
To have more leisure time
Money;
Time
F.4 Economics CH1-The Nature of Economics23
Choice
Because we cannot satisfy all our wants with limited resources, we have to make choice.
In this case:– Dating with Betty? Alice? Juliet?
F.4 Economics CH1-The Nature of Economics24
Opportunity cost
The highest valued option forgone
In this case:– The OC of choosing to date with Juliet is the
forgone dating with Alice? Betty?
F.4 Economics CH1-The Nature of Economics25
Limited resources Unlimited wants
Scarcity
Choice
Opportunity cost
Scarcity, Choice & OC
F.4 Economics CH1-The Nature of Economics26
Multiple Choice Exercise
(1) Which of the following statements concerning wants is FALSE?
Human wants will not exists if men are more concerned for others.
Human wants are unlimited.The priority of wants for a person can
change over time.Wants may be different for different
persons.
C
A
B
D
F.4 Economics CH1-The Nature of Economics27
(2) Which of the following statements about choices is FALSE?
In making choices, some wants have to be given up. It is scarcity that leads to choices. Sacrifice is involved in making choices. We always choose the alternative of the second priority
A
C
B
D
F.4 Economics CH1-The Nature of Economics28
(3) With limited pocket money, you rank soft drink first, followed by potato chips, and finally a sandwich. What is your opportunity cost of buying the bottle of soft drink?
Another bottle of soft drink.A pack of potato chips.A sandwich.A pack of potato chips or a sandwich
ABCD
F.4 Economics CH1-The Nature of Economics29
(4) The cost of an event is the
Best option
Best option forgone
money spent.
All options available
A
B
C
D
F.4 Economics CH1-The Nature of Economics30
(5) Scarcity 1. means that the amount of resources is not
sufficient to satisfy all our wants. 2. means that we want more than we have. 3. implies we have to make choices.
(1) & (2) only (1) and (3) only (2) & (3) only (1) , (2) and (3)
A B
C D
F.4 Economics CH1-The Nature of Economics31
(6) Which of the following statement on “want” is CORRECT?
If we are very rich, we can satisfy all our wants. Want refers to a desire as well as the ability to satisfy that desire. Because of unlimited wants, we cannot satisfy some of our wants. People are willing to give up some of their wants.
A
B
C
D
F.4 Economics CH1-The Nature of Economics32
(7) The cost of an act will be zero if …..
there is no money the act has no result there is no price there is no scarcity or there is no choice
A
B
C
D
F.4 Economics CH1-The Nature of Economics33
Remarks on Opportunity Cost
Only the highest valued option forgone is regarded as cost
F.4 Economics CH1-The Nature of Economics34
Would the cost change if:1. the watch does not function as well as expected?
2. The book is now half-priced?
Remarks on Opportunity Cost
Cost changes only if the highest valued option forgone changes.
Exercise 5: TB/P.11/MCQ 4
F.4 Economics CH1-The Nature of Economics35
How does the cost change if the songs on the CD is not as good as expected?
Remarks on Opportunity Cost
Change in value change in cost
Exercise 6: TB/P.12/Q 1.3Exercise 7: TB/P.12/MCQ 5
Closer Look: TB/P.2/1.9
F.4 Economics CH1-The Nature of Economics36
Economic Goods
A good is economic good if its quantity available is i____________________ to satisfy all our wants
Scarce resources are used in production More of it is p_______________ Quantity demanded (Qd) is larger than quanti
ty supplied (Qs) at zero price Commanding a positive price
– Examples: air conditioner & sport shoes
F.4 Economics CH1-The Nature of Economics37
Free Goods
A good is free good if its quantity available is s________________ to satisfy all our wants
No scarce resources are used in production More of it is NOT preferred Quantity demanded is smaller than quantity
supplied at zero price Commanding zero price Examples:
– Sea water & air on the earth
F.4 Economics CH1-The Nature of Economics38
Sea water Tap water
Free Goods? Economic Goods?
Exercise 8: TB/P.13/MCQ 6Exercise 9: TB/P.14/MCQ 7Closer Look: TB/P.15/1.10
F.4 Economics CH1-The Nature of Economics39
Free vs. Economic Goods
Free Goods Economic Goods
Produced without using scarce resources
Produced with scarce resources
More of it is NOT preferred
More of it is preferred
Zero production OC Positive production OC
Zero price Positive price
Qd < Qs at zero price Qd > Qs at zero price
F.4 Economics CH1-The Nature of Economics40
Consumer Goods
A consumer good is any good which satisfies human wants directly
They are produced for direct consumption
Examples:– air-conditioners used in classrooms– bread consumed by housewives
F.4 Economics CH1-The Nature of Economics41
Capital/Producer Goods
A capital good is any good that is used for producing other goods or services
They are produced for indirect consumption
Examples:– air-conditioners used at home– bread used as part of decoration in a bread
shop
F.4 Economics CH1-The Nature of Economics42
Consumer or Capital Goods?
Consumer
Goods
F.4 Economics CH1-The Nature of Economics43
Consumer or Capital Goods?
Capital G
oods
F.4 Economics CH1-The Nature of Economics44
Consumer vs. Capital Goods
Whether a good is consumer good or capital good is NOT classified by its nature, but by how and where it is being used.
F.4 Economics CH1-The Nature of Economics45
Basic Economic Problems
What to produce?– What kinds of product to be produced?– What quantity of it should be produced?
How to produce?– Which production method to be used?
For whom to produce?– How to distribute the quantity?– What criteria should be chosen?
Exercise 10: TB/P.16/MCQ 8
F.4 Economics CH1-The Nature of Economics46
Traditional Economy
Economic decisions are made by referring to customs and traditions
The three basic economic problems are being solved by following the practices of previous generations/ancestors.
F.4 Economics CH1-The Nature of Economics47
Planned/Command Economy
Most/All economic decisions are made by the central authority
Most of the productive resources are socially owned and under the control of the central government
The three basic economic problems are being solved by following a set of c__________________ and o___________.
F.4 Economics CH1-The Nature of Economics48What to produce?
F.4 Economics CH1-The Nature of Economics49
For whom to produce?
F.4 Economics CH1-The Nature of Economics50
Market Economy
Most/All economic decisions are made by individuals
Most of the productive resources are p________________ owned
The three basic economic problems are being solved by p__________ m____________________.
F.4 Economics CH1-The Nature of Economics51
Market Economy
What to produce?– Product prices serve as signals to direct the
producers to find out what to produce– Higher price ensures the most profitable kind of
products
F.4 Economics CH1-The Nature of Economics52
F.4 Economics CH1-The Nature of Economics53
Market Economy
How to produce?– Factor prices serve as signals to direct the
producers to identify the cheapest method of production
– Lower price ensures the least costly method of production or ensures the most profitable production
F.4 Economics CH1-The Nature of Economics54
F.4 Economics CH1-The Nature of Economics55
Market Economy
For whom to produce?– Prices determine who gets what and in what
quantity– Goods are distributed to those who are able and
willing to pay the highest price for it
F.4 Economics CH1-The Nature of Economics56Exercise 11: TB/P.19/MCQ 9
F.4 Economics CH1-The Nature of Economics57
Mixed Economy
NO pure planned or market economy All the economies are mixed economy which
contains both the features of planned and market economy
Resources are allocated by– market forces, commands and orders from the
authority, and traditions and customs
Exercise 12 & 13: TB/P.20/MCQ 11 & TB/P.20/Q 1.6
F.4 Economics CH1-The Nature of Economics58
Basic Circular Flow
Economics Clinic: TB/P.23-26