Objectifs globaux : Identify the need for data and models to understand the economic and social reality.
Objectifs travaillés : Simple market terms, analyzing the economic circuit.
Resources :
PDF: The model, a simplified representation.
PDF: The economic circuit.
PDF: Household confidence in the market.
PDF: Inflation: The model.
PDF: Evaluation, Session 3
Contents
Activité 1
What is the difference between a reduced model and a theoretical model?
An example of a reduced model
An example of a theoretical model
PDF: The model, a simplified representation.
Read the text and answer the questions:
The reduced model and the theoretical model seek to account for reality in a more reduced and / or simplified form.
The reduced model seeks to reproduce reality by physical materials, respecting the proportions and details of the model to be represented, while the theoretical model seeks to describe / explain reality by an intellectual representation either by schematization (plan, drawing ) or by constructing logical relationships between variables to illustrate or understand the real world.
Activité 2
The economic circuit: a simplified representation of the economy.
Copy the information and the graph.
The economic circuit highlights the relationships at the level of the entirety of society, the interdependencies of agents (in the graph below limited to households and companies) and the operations that link them (production, consumption, etc.) .
1. Search the internet for definitions of “households”, “businesses” and “market goods and services”, then illustrate them with examples.
In economics, a household is a person or a group of people living in the same residence. Most economic models do not address whether the members of a household are a family in the traditional sense. In reality, there is not always a one-to-one relationship between households and families.
ex: a single man in a flat, a family of five, three roommates.
A business is defined as an organization or enterprising entity engaged in commercial, industrial, or professional activities.
ex: a bakery, Renault, a hairdressers
Market goods and services are generally intended to be sold on the market at a price calculated to cover their production cost. Market goods and services are all goods and services produced by market activity branches, all imported goods and services with the exception of those that are directly purchased externally by the government in the framework of its routine operations and by households, and the production part of non-market branches of government and private non-profit institutions serving households.
ex: a baguette, a car, a haircut
2. Complete the diagram by associating each number with one of the following elements:
3. What colour are the arrows that correspond to the cash flows? to real (physical) flows?
Cash flows: Red
Physical flows: Green
PDF: The economic circuit.
4. Complete the schema with the following exchanges:
A: Repayments
B: Goods / Services
C: Subsidies / Non-market services
D: Loans / Interest (x2)
E: Salaries
F: Compulsory levies (x2)
G: Social benefits / Non-market services
H: Payments for goods and services
I: Loans
J: Refunds / Investments
K: Work
Activité 3
Measuring to predict
Look at the graph and answer the questions.
PDF: Household confidence in the market.
Synthetic confidence indicator of households.
A period when household confidence has decreased, there are several possibilities: from 2001 to 2003 for example.
A period when household confidence has increased: from 2013 to 2017 for example.
Increased confidence of households can be favorable to consumption: we do more purchase projects (including automobile or real estate) when you trust in the future. And we save less money if we do not fear the future.
It can be assumed that the opinion of households on their economic environment and/or their personal economic situation will impact their decision to consume or to save. To know this level of confidence can make it possible to predict a possible variation in economic activity.
Activité 4
Using a model to describe inflation
Read the text and answer the questions.
The three steps necessary for the study of inflation are:
1: defining the phenomenon,
2: measuring the phenomenon,
3: researching the explanatory elements.
The explained variable is inflation and explanatory variables:
– the imbalance of supply/demand (a decrease in supply facing an unchanged demand will increase prices)
– rising production costs (an increase in oil prices, for example, will affect all prices)
– Income inequalities (income inequality will create social struggles which will cause a price reaction)
– currency value (too fast of an increase in monetary mass causes a decrease in relative value)
Evaluation
Answer questions about this lesson.
How do economists, sociologists and political scientists reason and work? – Séance 3