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ECS STUDYNOTES COMPREHENSIVE COMPILED BY KHEITHYTUTORIALS
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ECS STUDYNOTES COMPREHENSIVE COMPILED BY KHEITHYTUTORIALS
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ECONOMICS 1B {ECS 1601}
INTERDEPENDENCE OF THE MAJOR SECTORS, MARKET AND
FLOWS IN A MIXED ECONOMY
Production is not pursued for its own benefit, the ultimate aim is to use or
consume the products to satisfy human wants.
Production creates income and this income is then spent to purchase
products.
This process contains 3 major elements are:
Production
Income
Spending.
One problem is how the income is distributed among the various
participants in the economy.
The following are 4 economic participants:
Households/Consumption (C)
Government Expenditure (G)
Foreign sector (Exports & Imports) (F)
Businesses/Firms (B)
Production, income and spending are all FLOWS.
Stock variable – can only be measured at a particular point in time and
has no time dimension (wealth, assets, liabilities, capital, population, and
balance on savings account).
FLOW VARIABLE – can be measured over a period of time (income,
profit, loss, investment).
In mixed economy households, firms, government and foreign sector are
all participants.
Exchange is an important economic activity that links all the various
sectors.
1. HOUSEHOLDS
Households can be defined as all the people who live together and who
make joint economic decisions.
Can be an individual, whole family.
These members are called consumers.
Consumption – the act of using or consuming goods and services.
Symbol C = total consumption or consumer.
In a market economy it is the households or consumers that largely
determine what should be produced.
In a mixed economy most of the factors of production are owned by
households.
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