piigsty

Carrying on from #24, PIIGSty presents an additional (but equally important!) insight into this ever important issue. Now we turn and look at what factors affect the level of national income.

Heres the PDF PIIGSty Econ 101 #25 Factors Affecting NI

One of the most important concepts in economics is detailed in the following diagram on the circular flow of income. This explains how different sectors of the macroeconomy are linked and interact with each other from your average household to the workplace. How does money flow IN and what makes money flow OUT?

A term that has entered back into every day eco-speak is ‘national income‘ which quantifies the size of an economy. Its defined as the total income earned by permanent residents of a country in a year OR the total value of economic output produced over a year OR the total spend on output…

Pretty flexible definition then! Each has its pros and cons but ALL are important to know.

Heres the PDF PIIGSTY Econ 101 #24 National Income

These figures can all be very useful but there are also limitations to measuring an economy…

Money makes the world go ’round. But..what exactly is money? Is it just those banknotes and coin we carry around…? How is money created and what can banks do to create it..all these questions are answered in this Econ 101!

Heres the PDF PIIGSTY Econ 101 #23 Money and Banking

Let us look at the commercial banks more closely…

The 4th Factor of Production (FOP) is Enterprise (and the reward for providing it, profit). Enterprise  is defined as the intitiatve involved in organising land, labour and capital and which bores the risks involved in production.

Heres the PDF PIIGSTY Econ 101 #22 Enterprise and Profit

The 3rd Factor of Production (FOP) we’ll go through is Capital (and the reward for providing it, interest). Capital is defined as anything made by man and used in the production of goods/services

Heres the PDF PIIGSTY Econ 101 #21 Capital and Interest Rates

How do interest rate changes affect the wider economy?

The 2nd Factor of Production (FOP) we’ll go through is Labour (and the reward for providing it, wages). Labour is defined as any human effort which goes into the production of goods/services.

Heres the PDF PIIGSTY Econ 101 #20 Labour and Wages

The 1st Factor of Production (FOP) we’ll go through is Land (and the reward for providing it, rent). Land is defined as anything supplied by nature and used in the production of goods/services i.e. forests, farmland, rivers, seas and mineral wealth.

Heres the PDF PIIGSTY Econ 101 #19 Land and Rent

Whenever you produce a good/service, you need a certain combination of each of the 4 factors of production (FOPs). Some are more labour intensive than others (such as manufacturing). Some are more land intensive (such as farming). Some are more enterprise intensive (such as new technology ideas i.e. IPods).

Heres the PDF PIIGSTY Econ 101 #18 Markets for FOPs

Next up in our Econ 101 classes is Price Discrimination. This is defined as the selling of a good (or service) to different consumers at different prices, where such prices aren’t caused by differences in cost.

Heres the PDF PIIGSTY Econ 101 #17 Price Discrimination

The final market structure is ‘Monopoly‘ (and no, nothing to do with passing ‘GO’ and receiving €200). In fact, there are no competing players…theres only one firm which can use its unhindered market power to control price and quantity supplied – to earn maximum profitability and exclude other firms from competing with it.

After you study this, refer back to Econ 101 #11 to compare the short run (SR) and long run (LR) graphs of all 4 market structures.

Heres the PDF PIIGSTY Econ 101 #16 Monopoly