Unit 1 - 5 : Core Econ the Economy notes
Unit 1: The Capitalist Revolution
Unit 2: Technology, Population And Growth
Unit 3: Scarcity, Work And Choice
Unit 4: Social Interactions ...
UNIT 1: THE CAPITALIST REVOLUTION
1.1 INCOME INEQUALITY
90/10 ratio – average income of the richest 10% / average income of poorest 10%, also
known as income of the 90th percentile / income of 10th percentile
1.2 MEASURING INCOME AND LIVING STANDARDS
GDP is a measure of the total goods and services produced in a country which is then
divided by the country’s population
- Includes the goods and services produced by the government, such as schooling,
national defence, and law enforcement.
Disposable Income is the amount of wages or salaries, profit, rent, interest and transfer
payments from the government received over a given period such as year minus any
transfers the individual made to others (inc. taxes made to the government)
- Good measure of living standards because It is the maximum amount of goods and
services that a person can buy without having to borrow
GDP/DI leave out
1. The quality of our social and physical environment such as friendships and clear air
2. The amount of free time we have
3. Goods and services that we do not buy, if they are not provided by a government,
government structure + services delivered
4. Goods and services that are produced within the household, such as meals or
childcare, non-monetary transaction but still a transaction
5. Violence and Crime – depends on quality of ruled law
6. Political Freedom – people elsewhere don’t have
HOW CAN A SOCIETY BECOME BETTER OR WORSE WITHOUT A CHANGE IN GDP
- Cleaner air, less environmental damage
- political changes, strengthening of institutions
- more free time
- better racial inequality
- reduction in stress, work life balance
- Improvements to the educational sector
- better provision of mental health services
- better justice systems
- Reduction in crime rate
CAN INEQUALITY LOWER ECONOMIC GROWTH?
Richer people hoard their wealth for personal reasons – properties, savings should be used
in a meaningful way.
, 1.3 HISTORY’S HOCKEY STICK: GROWTH IN INCOME
Growth rate = change in income/original level of income
In some economies substantial improvements did not occur until they gained independence
from colonial rule
- India – British rule ended in 1947. In closing years of British rule life expectancy was
27 years fifty years on life expectancy is 65 years.
For a very long time, living standards did not grow in any sustained way.
When sustained growth occurred, it began at different times in different countries, leading
to vast differences in living standards around the world.
Smiths insights is the idea that a significant source of prosperity is the division of labour or
specialisation and that this is in turn is constrained by the ‘extent of the market.’
‘Smiths is often associated with the idea that prosperity arises from the pursuit of self-
interest under free market conditions.’
1.4 THE PERMANENT TECHNOLOGICAL REVOLUTION
The future will be transformed morally, socially and materially by technological progress
Scientific + technological advances occurs at the same time as the upward kink in hockey
stick in Britain in the middle of the 18th century.
1.5 THE ECONOMY AND THE ENVIRONMENT
Increasing emissions of CO2 larger amounts of CO2 in the earth’s atmosphere
perceptible increases in the northern hemisphere’s average temperature
Since 1900, average temperatures have risen in response to increasingly high levels of
greenhouse gas concentrations. These have mostly resulted from the CO2 emissions
associated with the burning of fossil fuels.
The environment consequences of GDP growth
Likely consequences of global warming are far reaching:
Melting of polar ice caps
Rising sea levels that may put large coastal areas under water
Potential changed in climate change and rain patterns that may destroy the world’s
food-growing areas.
Climate change is a global change. But many of the environmental impacts of burning fossil
fuels are local, as residents of cities suffer respiratory and other illnesses as a result of high
levels of harmful emissions from power plants, vehicles, and other sources.
Rural communities, too, are impacted by deforestation (another cause of climate change)
and the depletion of the supply of clean water and fishing stocks.
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