Here are the slides used in the contact sessions and voice-over PPT lecture video's. Watch the video on YouTube and then use your textbook to supplement the slides to make your own set of notes. Chapter 3 deals with the circular flow of economic activity.

1. Economics for south african students
chapter 3:
The circular flow of economic activity
ECON-1

2. What do we know about economics?
They are also the owners of scarce resources
Capital Labour
Natural
resources
Entrepreneurship
Individuals / households have unlimited wants
Scarcity means that choices have to be made
When you choose, there is opportunity cost

3. There is a circular flow of activity
Households
consume
goods and
services to
satisfy wants /
needs
Households own
the factors of
production
Market for factors of
production
Firms
Use factors of
production to
produce goods
and services
Market for goods and services

4. There is a circular flow of activity
Buys g+s to
consume
Offer CLNrE
Offer g+s
CLNrE
Receive
Interest,
Wages,
Rent,
Profit
Pays I, w,
r, p
Pays for g+s
Payment
for g+s
Market for
pf
Firms
Market for g+s
Households

5. There is a circular flow of activity
More about the households:
lDescription
lConsume to max utility
lDetermines WHAT is produced
lRole:
¡Income
¡Spending
lIs the C in total demand

6. There is a circular flow of activity
More about the firms:
lDescription
lProduce for max profit
lDetermines HOW to produce
lRole:
¡Income
¡Spending
lIs the I in total demand

7. Production income and spending
There are 2 flows /
activities:
• Production
• Income and
• Spending
The values of the 3 flows
should always be equal

8. The circular flow and the government
Government
• Definition
• What is the primary function of the
government?
• How does the government participate in
the circular flow?
• Income (T)
• Expenditure (G)
• Transfer payments
• Leakage or injection into production and
spending?

9. The government

10. The circular flow and the rest of the world
Foreign sector
• Definition
• SA is an open economy
• Transactions are recorded in the balance of
payments
• How does the foreign sector participate in
the circular flow?
• Exports (X)
• Imports (Z)
• Leakage or injection into production and
spending?

11. The foreign sector

12. The circular flow and the financial sector
Financial sector
• Definition
• The financial sector is the links beteen
surplus and deficits of funding –
participates in the circular flow:
• Savings (S)
• Investment (I)
• Leakage or injection into production and
spending?

13. Financial institutions

14. The key elements of the
circular flow

15. Did we achieve the
outcomes?
Can you explain and draw the three flows in the economy?
Can you identify the key role players and describe them?
Can you describe the two types of markets?
Can you draw the circular flow of economic activity?
Chapter 3 in Mohr & Fourie
eFundi
Answer the Quiz questions
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