Introduction

The history of Ana and Ivan

Ana and John got married some months ago.  John works in a garage and Ana works in a software computer company.  Thanks to their work, they help to produce goods and services.  Ana and John go working to earn money.  

And every time they will consume: buying goods and services and spending money as a circle without end...

Together they have an income of 200 EURO per month.  This seems a lot but young people need a lot also.

What do they need:

Wants can be so different:

To fulfill our needs, we must make choices continuously. 

Basic vs other needs
Material vs non-material needs
Prosperity and welfare
Individual vs collective needs
Ranking of importance in needs
Some definitions
Goods and services

Goods and services are all the valuable things that people produce.

Capital goods vs consumption goods
Consumption and production
Trade

Trade is the buying and selling of goods and services.

Households, companies and the economic cycle

Ana and Ivan are working in companies.  But they are also parts of a household.  Households and companies are two main notions in economy.

The interaction between households and companies can be made clear in a scheme, named the economic cycle.

In that scheme, we can distinguish 2 streams:

Households

A household is any group of people living together as a decision-making unit.  Every individual in the economy belongs to a household.  Some households consist of a single person, while others consist either of families or groups of unrelated individuals (e.g. students sharing an apartment).

Each household has:

Firms/companies

A firm is an organization that uses resources to produce goods and services.  All producers are called firms.  Car makers, farmers, banks, ... are all firms.

The economic cycle

(picture)

Exercises

Situate these economic activities in the economic cycle:

  1. Mother pays bread in the bakery.
    Paul works as a waiter in a restaurant.
    Jack receives an income from a company.
    The milkman delivers eggs at home.
     
  2. Victor is still studying.
    During the summer holidays he worked a month in a garage.
    At the end of the month, Victor received his money.
    What do you think Victor did with the money?  He bought a motorcycle in the garage.