Canadian Economy

Unit 7

Economic Essentials

• Economics studies the production, exchange, and consumption of goods and services, all of which involve the flow of money.

• Biggest problem is scarcity (this includes unemployment)

• Laws of Supply and DemandSupply: when prices are high, producers of goods and

services usually increase production.• When prices are low, producers tend to cut back on

production (create scarcity)

Demand: When prices for a product or service goes down, demand goes up• When the price increases demand falls.

Global Economy

• Globalization: the process of economic, technological, political, and cultural forces creating a single global society.

• Global Economy - International business and trade. Example: Branch plants are factories offices and stores owned by foreign invest

• Trends – general direction in which something (product etc) is moving.

• Goods – produces that can be sold

• Services – a system of supplying a public want or need (e.g., banking, transportation)

3 Basic Economic Questions

• What is to be produced?• Example: A farmer must decide whether to grow

soy or canola.

• How is it to be produced?• Example: A farmer needs to consider what

technology is needed to produce and process the crop.

• For whom is it to be produced?

• Example: A farmer needs to determine if the crops will be sold within Canada or be exported.

Resources

• Land Resources – all natural resources that may be used to produce goods and services, such as land, water, fish, forests, minerals etc.

• Human Resources – people to produce goods and services such as fishermen, forestry workers, store owners etc.

• Capital Resources – money and human made goods (capital goods), such as transportation infrastructure, technology, educational facilities

• Resource- based economy – economy that relies on the extract and/or primary processing of raw materials

Industries

• Primary Industry: extract raw material from nature, such as agriculture, oil and gas extraction, logging and forestry, mining, fishing, and trapping

• Secondary Industry: takes the output of primary industry and manufactures finished goods or where they are suitable for use by other businesses, for export, or sale to domestic consumers. (Many of these industries consume large quantities of energy, also produce waste materials and waste heat that may pose environmental problems or cause pollution.)

• Tertiary Industry: Service industry/tourism and information/communication industries

GDP and GNP

• Gross Domestic Product (GDP) – measures market value of all goods and services produced in a country during a set period of time (even goods and services produced by foreign owned companies)

• Gross National Product (GNP) – measures total market value of all goods and services produced by a nation’s companies – even if those companies are located in other countries (Walmart, GM, all American Fast-Food)

• Consumer price index – a measure of price changes for standard goods and services

Economic Statistics

• Business Cycle – alternating period of ups and downs in economic activity