Summary ECS1601 Economics - Study Notes

CHAPTER 3 – INTERDEPENDENCE BETWEEN MAJOR SECTORS, MARKETS
AND FLOWS IN THE MIXED ECONOMY
STUDY UNIT 1

Production, Income and Spending

*Identify the three major flows in the economy
Production – occurs and generates income
Income - earned
Spending – Buy available goods and services

*Distinguish between a flow and a stock
(Box 3-1 Stocks and Flows)
STOCKS FLOWS
 Measured at a particular point in time  Has a Time dimension – only
 NO time dimension measured over a period
 Water level of dam measured at a  Flow of water into the dam measured
particular point in time (at 00:00 on over a period (1 May 2007 inflow
May 1 2007 capacity was 72,64%) was measured as 250 cubic metres
per second
 Stock Takes  Calculation of sales, profit or loss
 Still pictures  Moving pictures
Examples Examples
 Wealth  Income
 Assets  Profit
 Liabilities  Loss
 Capital  Investment
 Population  Number of births and deaths
 Balance in savings account  Saving
 Unemployment  Demand for labour
 Gold reserves held by SA Res  Gold sales, gold production
bank
 Stocks and flows are related
 Stocks can only change as a result of flows
 Prices are ratios between different flows
 Ratios between a stock and flow and visa versa have a time dimension
 Ratios between two stocks and two flows have no time dimension

“Identify the two basic sets of markets in the economy
Goods Markets – Markets for goods and services
Factor Markets – Markets for factors of production




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