1.3 circ flow students (1)
Page 1: Key Concepts in Economics
Scarcity: Limited resources in comparison to the unlimited economic wants.
Economic Want: Desires for goods and services that can be satisfied by economic resources.
Opportunity Cost: The value of the next best alternative foregone when a choice is made.
Resources/Factors of Production:
Land
Labour
Capital
Enterprise
Page 2: Income Variables
Y = Income
C = Consumption Expenditure
S = Savings
I = Investment
T = Taxation
G = Government Expenditure
M = Imports
X = Exports
Leakages (L): Outflows from the economy (Savings, Taxes, Imports).
Injections (J): Inflows to the economy (Investment, Government Spending, Exports).
Output/Money Being Spent (O) = Total expenditure (E).
Page 3: Circular Flow of Income Model – Two Sector
Two Sector Economy:
Consists of Households and Businesses.
Households provide factors of production to businesses in exchange for income (Y).
Businesses supply goods/services to households for consumption (C).
No leakages/injections in a closed two-sector economy: Y = C.
Page 4: Equality in Circular Flow
Total Output = Total Income = Total Expenditure: O = Y = E.
Page 5: Current Economic Insights
Review Phillip Lowe's latest statement about the economy.
Questions:
Australia’s global ranking for natural disaster costs?
Economic long-term impacts of natural disasters in Australia?
Concept of "Storm-o-nomics".
Page 6: Circular Flow of Income Model – Three Sector
Three Sector Economy includes:
Household Sector: Receives income (Y), provides consumption (C).
Business Sector: Receives savings (S) and provides investments (I).
Page 7: Income and Expenditure in Three Sector
Householders save part of income with financial institutions, which lends money to businesses.
Income Equation: Y = C + I (Income = Consumption + Investment).
Page 8: Understanding Savings and Investment
Equations:
Y = C + S
O = C + I
C + S = C + I
Thus, S = I (Savings equals Investment).
Page 9: Adam Smith Overview
Brief Summary: Who is Adam Smith?
His main ideas and contributions to economics (e.g., the concept of the 'invisible hand').
Additional interesting facts about him.
Page 10: Comparing Economic Systems
Research Topics:
Features of Capitalism vs Communism.
Post-WW2 division of Germany — East vs West.
Economic development levels prior to the Berlin Wall fall.
Page 11: Current Issues in Australian Manufacturing
Investigate the challenges facing Australia's manufacturing sector.
Focus on QANTAS’s situation and whether government assistance is warranted.
Gather views from Sir Richard Branson on this topic.
Page 12: Circular Flow Model - Four Sector
Introduction of the Government Sector (G) into the model.
Government Tasks:
Taxation (T): Taxes collected on various economic activities.
Government Expenditure (G): Spending on services and policies.
Income Equation: Y = C + I + G.
Page 13: Expanding the Model with Government
Government combines local, state, and federal levels.
Government contributes to economy through taxation and expenditure to enhance income flow.
Page 14: Circular Flow Model – Five Sector
Consideration of International Trade:
Economies rely on both imports (M) and exports (X).
Definitions of leakages (S, T, M) and injections (I, G, X).
Page 15: Open Economy Dynamics
Equation for Level of Income (Y): Y = O = E = C + I + G + (X - M).
Leakages and injections affect overall income flow in open economies.
Page 16: Completing the Circular Flow Model
Income Equilibrium: S + T + M = I + G + X.
Variations in income levels based on relative sizes of leakages and injections.
National income determined by aggregate demand with total expenditure: E = C + I + G + (X - M).