2. As previously discussed the basic problem of economics is that we, as individuals or societies as a whole, cannot have everything we want. For individuals, money and time are the economic resources that are most scarce. For societies, the scarce economic resources used in all types of production include natural, capital and human resources.

3. Natural Resources Capital Human Resources

4. Natural resources are those that nature provides, such as land used for farms, roads, buildings etc., water, sunlight, wind, oil, forests, and minerals

5. Capital resources include the processed materials, equipment and buildings used in the production process. It is important to note that the term “capital” in economics does not mean financial capital (eg. stocks and bonds). These items are not considered to be real capital by economists.

6. Human Resources include both labour which refers to all the human effort that is used directly in production, as well as, entrepreneurship which refers to the creativity, innovation and initiative also needed for production. A product or service must be “invented” before it can be produced.

7. Economic efficiency – obtaining the highest benefit from the country’s scarce resources (e.g. spending tax dollars wisely). Income equity – fairly distributing a country’s total output amongst its citizens (e.g. paying people fairly for the type of work they do). Price stability – minimize the country’s rate of inflation (general level of prices) in order that people can continue to buy the same level of goods and services.

8. Full employment – minimize involuntary unemployment in the labour force; keep Canadians working and contributing to the Canadian economy. Viable balance of payments – balance Canadian imports and exports (e.g. transactions with other countries should be fairly well balanced between dollars coming into and leaving Canada). Economic growth – maintain a healthy rate of economic growth in order that present and future generations will enjoy a high standard of living. Environmental sustainability – minimize the harm to the Canadian physical environment (e.g. air, water, land).

9. Ms.Persaud – Lesson 3 Semester 2 – Feb 2013

10. Positive economics deals with FACTS Facts that can be confirmed with data Examples: Canada spends $10 billion more on national defense than on higher education An increase in the price of carrots to $5 a bushel gives farmers a higher living standard and helps to save 1000 family farms

11. Deals with opinions about what should happen or what ought to happen Examples of normative economics The Canadian government should be more concerned with environmental issues and less concerned about economic growth The Canadian government should raise the minimum wage. Both of the above statements are fuelled by value judgements

12. In order to explain economic behaviour, economists may sometimes use two or more VARIABLES that have a measureable value. By doing so, they can see if change in one variable (independent ) may affect the other variable (dependant) in an INVERSE or DIRECT manner

13. INVERSE – if the value of the independent variable rises or falls and the dependent variable movesin the opposite diretion, the variables are said to have an INVERSE relationship. A fall in the price of satellite television service increases the number of satellite subcribers

14. DIRECT – if the value o f the independent variable rises or false and the dependent variable moves in the same direction the variables are said to have a direct relationship. A decrease in the price of Coke decreases the quantity purchased of Pepsi

15. A rise in the starting salary for teachers increases the number of people applying for teachers’ college. An increase in the amount of cheesecake that Ms.Persaud eats will result in a decrease in the number of clothes in her closet that will fit her. Direct or Inverse??