Objectifs globaux : Identify the main questions that economics deals with
Objectifs travaillés : Allocation of resources, balancing utility and price.
Resources :
PDF: How do we distribute wealth?
PDF: The consumer’s choice, between utility and price
PDF: How can we allocate resources to satisfy all economic players?
PDF: Evaluation
Contents
Activité 1
Copy these definitions
« Resource allocations: The resources available for people to produce are scarce, that is to say in limited quantities (water, land, energy, time, etc.). How can we use these to satisfy human needs which are multiple and unlimited? It is this question of allocation of resources that economists seeks to answer.
Economy: Study of all behaviours related to the production, distribution and consumption of goods and services produced in limited quantities. »
The cake represents all the available wealth.
How is the cake made? = who produces wealth?
What are the ingredients of the cake? = what do we need to produce?
With what energies do we make this cake? = what are the factors of production?
Who is looking at the cake? Who is holding the knife? = how is the wealth shared?
If the resources were unlimited, there would be no problem of meeting needs: all needs would be satisfied. However, as resources are only available in limited quantities (scarcity), a distribution problem will arise.
Activité 2
Léon’s decision
Take the case of Léon, a fan of video games and cinema, who has a leisure budget of €150 that he spends completely each month. A video game costs €50 and a cinema ticket costs €10.
Here are the possible combinations of spending on video games and cinema tickets depending on utility and budget:
(In this case: Utility = Léon’s satisfaction.)
He will choose column B, as it gives the most amount of satisfaction.
Activité 3
How can we allocate resources to satisfy all economic players?
PDF: How can we allocate resources to satisfy all economic players?
As resources are available in limited quantities (eg oil), the choices of individuals will have an impact on them (eg: depletion of natural resources, increase in their price, etc.)
Market: place where suppliers (companies) and demanders (consumers) meet.
Companies want to make as much profit as possible by taking into account the wishes of consumers and minimizing their production costs.
Both parties win: Businesses maximize profit and consumers get what they want for less.
The market does not always allow efficient allocation of resources (pollution, inequalities, etc.). In these cases, individuals feel that it is up to the state to intervene to correct this situation.
Evaluation
Answer questions about this lesson.
How do economists, sociologists and political scientists reason and work? – Séance 4