Grade 9

Unit 2:
Allocation
of
Resources
Unit 2 begins allocation of resources,
what does buying an ice cream and the
global economy have in common?
 Microeconomics and Macroeconomics
Let’s warm up those brains, I’m feeling very generous today and I’d like to give you $2000 that’s
around 45,516,000 VND as of today.

I want you to head to AtlasNext and make microeconomic decisions to design the room that I
have given you.
Decide what you need in your room to live and what you want from your room to make your life
fun and convenient. But remember you only have limited resources ($2000). Let’s take a look after
20 minutes to see what decisions you have made on a micro level.

You may take images from google and add them to your room, feel free to add a price, this can
just be an estimate of the products value, e.g. Television $300.
 Microeconomics and Macroeconomics
By the end of this chapter, we should be able to:

Explain the difference between Microeconomics and

Macroeconomics.

Identify the decision makers involved in

Microeconomics and Macroeconomics.
 Warm up Questions
Key Term: Market - An arrangement that brings
What will happen if you buy an ice-cream?
buyers into contact with sellers.
Which markets did you come into contact with when
Will more ice-cream be produced because of this?
allocating resources to your rooms?

As economists what is our role?

We look at the behaviour of individual markets, e.g.

Ice-cream market.

We also look at how the market as a whole, operates,

consisting of all markets!

What levels can this be done? Think Big!

National or a global scale!

 Differences Between Microeconomics and
Macroeconomics
Economics is divided into
microeconomics and macroeconomics.

Does anybody know what micro means?

Does anybody know what macro means?

As their name suggest Microeconomic

deals with small scale.

Macroeconomics deals with large scale.

Can you give an example of

microeconomics?

Can you give an example of

macroeconomics?
 Microeconomics
Key Term: Microeconomics - The
Accessing the markets to design your
study of the behaviour and decisions
rooms, were they microeconomic
of households and firms, and
decisions?
performance of individual markets.
Some examples would be:
Key Term: Market: An arrangement
Changes in earnings of a particular
which brings buyers into contact with
occupation. Give us all an example.
sellers
Changes in the output of the car
industry
Can you give some more examples of
Changes in the prices of airplane
Microeconomics?
tickets
How much a household spends on
food
 Macroeconomics
Key Term: Macroeconomics - The
study of the whole economy
Key Term: Market: An arrangement
which brings buyers into contact with
sellers
Can you give some more examples of
Macroeconomics?
Accessing the markets to design your
rooms, were they macroeconomic
decisions?
Some examples would be:
The number of people employed in
the economy
Changes in the country’s total output
Can you think of any other examples?
 Microeconomics Macroeconomics

Tuan Kiet Vingroup open

Output of car new ‘sleepless city
shopping for
industry
clothes?
GDP (Gross
Domestic World Total World
Profit) of Unemployment Economy
Vietnam accumulative
GDPs
 Microeconomics Macroeconomics

GDP (Gross
Domestic
Profit) of
Vietnam
Tuan Kiet
shopping for Output of car
clothes? industry

Vingroup open World Total World

new ‘sleepless city Unemployment Economy
accumulative
GDPs
The Connection Between Macroeconomics and
Microeconomics
Many of the concepts used Microeconomic
in microeconomics are also decisions and
used in macroeconomics interactions add up to
the microeconomic
Like the demand for a single
picture. This means
product and the total demand for
goods and services in an economy. the changes in the
microeconomy affect
Also, why the price of a particular
product may change and why the
changes in the
price level in the economy may macroeconomy and
change.. vice versa!
Take a look at those two
concepts there? Can you
The Connection Between Macroeconomics and
Microeconomics
What do you think would But what if the
happen in a country if government the cut
there was a reduction of (decreased) income
output in the car industry tax (macroeconomic)
(microeconomic) on a what microeconomic
macroeconomic level? decisions might
change?
What about purchases of
May be a rise in the cars?
country’s unemployment The purchases of cars may
rate (macroeconomic). increase! (microeconomic)
 Group Activity
In your groups decide whether the following are microeconomic or
macroeconomic decisions.
● Why are pilots ● Why is the
paid more than diamond industry
cabin crew? ● Why is the output expanding in
of Indian greater China?
than the output of
● What can be done Sri Lanka? ● Why does Pakistan
to reduce road import more than
congestion in export?
Paris?
Decision Makers in Microeconomics and
Macroeconomics
Economic Agents Private Sector

Key Term: Those who

Firms owned by shareholders
undertake economic activities
and individuals
and make economic decisions
The decision makers in
microeconomics and Firms owned by shareholders
macroeconomics are and individuals
sometimes referred to as
economic agents.

Households, Firms and

Can you name three?
Government
Decision Makers in Microeconomics and
Macroeconomics
How do these three
economic agents link
together?
Households, what economic
decisions do they make? A government produces and
provides some products ,
Households are buyers provides financial benefits, and
(consumers), savers and taxes and regulates the Private
workers Sector.

Firms are business concerns that Government is the system

produce goods and services, and
employ workers and other factors of
which rules a country or region
production. .
 The Aims of Decision Makers
In your groups what are the aims of
………….
Households/Consumers? Firms
To seek low prices and good quality
products. As labour they want good working Firms in the Private Sector
conditions and high pay. As savers they usually try to make as much
want their money to be safe and get a good profit as possible.
return (interest/dividends.

Governments

A government want a strong economy. It may have objectives for

the macroeconomy, including full employment of labour. It may
also seek to improve the performance of individual markets by, for
example, taxing cigarettes.
 Activity 1
Decide in each case in
your teams whether the ● A shorter working
following are likely to be week
an aim of the government, ● Many different
households or firms: sellers of
consumer goods
● Many different
sources of raw
materials

● Higher Tax
Revenues
 Activity 2
Click the link to the
google form.
Learning objectives:
The Role of
Explain the key allocation decisions
Markets in
Describe the nature of the market
system Allocating
Analyse how the price mechanism Resources
provides answers to the key allocation Unit 2.2 Chapter 6
decisions
 Introduction

The US economy is changing. For example, shale oil production and

high-technology industries are expanding, while the production of the glass
manufacturing and postal service industries are declining. There are also
changes in how products are being made. For instance, more and more
capital goods are being used in the US car industry. In addition, the richest
Americans are consuming more goods and services, while some of the
poorest Americans are consuming less. Why are these changes occurring?
Who makes the decisions and how are they put into effect ?
Introduction: The Role of Markets in Resource
Allocation

Let’s take a look at the role of markets in

resource allocation.

Take notes on the different types of

economy.

What makes the decisions in those

economies?

Which do you like and why?

 The Three Key Allocation Decisions
All economies are changing and they have to answer three
fundamental questions?
Who is to receive the
What to Produce? How to Produce it?
Products Produced?
These questions arise because of the basic economic problem of unlimited wants
exceeding finite resources.
Welcome to Ollyville the world’s newest country……. It’s all yours,. What will you produce,
why? How will you produce it? Who will receive it and why?

The answers to these above questions differ in economic systems.

Key Term - Economic System: the institutions and mechanisms that influence economic
behaviour and determine how resources are allocated.
 Different Economic Systems
There are three main economic systems.

One is a planned economic system, AKA; command,

centrally planned, collectivist, etc. Watch the video
and take notes about what defines a planned
economic system, it’s advantages and
disadvantages.

Key Term - Planned Economic System: An

economic system where the government
makes the crucial decisions, land and
capital are state-owned and resources are
allocated by directives.

Key Term - Directives: State instructions

given to state-owned enterprises.
The other two types are a market economic system
which we will discuss next and a mixed economic
system (discussed in chapter 15 so don’t worry!)
 A Market Economic System
An economy which operates a market economic
system is known as a market economy or a free
enterprise economy. It is one in which buyers, also
known as consumers, determine what is
produced. They signal their preferences to sellers
through the price mechanism.

Key Term - Price Mechanism: The way decisions

between households and firms interact to decide
the allocation of resources.

Key Term - Market Economic System:

an economic system where consumers
determine what is produced, resources are
allocated by the price mechanism and land
and capital are privately owned.
What decides the course of a market
economy. What are the advantages and
disadvantages?
 A Market Economic System
● Those who earn the highest incomes
● Government intervention is minimal exercise exercise the maximum influence
on what is produced!
● Land and Capital is privately owned Key Term - Capital-intensive: the use of a
high proportion of capital relative to
● Private Sector firms decide how to produce
labour
the products consumers want to buy Key Term - Labour-intensive: the use of a
● Some firms (like a car manufacturer)may have high proportion of labour relative to
employed a large amount of of capital relative capital
to labour, e.g. machinery - These are said to
Now in your teams answer these
be capital Intensive
questions about a market economic
● Other firms like hotels use a relatively high
system:
number of employees compared to the capital
used. These are labour-intensive
● Firms will seek to achieve the lowest cost 1. What is Produced?
method of production, while producing the 2. How is it produced?
highest quality product 3. Who gets the products produced?
 The Role of the Price Mechanism
Demand Supply
The willingness and ability The willingness and ability
to buy a product. to sell a product

Market Equilibrium Market Disequilibrium

A situation where demand A situation where demand
and supply are equal at and supply are not equal
the current price at the current price
 Auction
What will you pay me for
How would you describe What happened to the
these items?
the price of option A. price for auction C?
You have 10 Oliver’s don’t
spend them all at once.

A. There are fifteen of C. There are fifteen of

B. There are five of these
these these
 The Role of the Price Mechanism
Market economy, resources move automatically as a result of changes in
price.. Price changes are determined by the interaction of the market forces
of demand and supply.

Resources are automatically as a result of changes in

price.
Price changes are determined by the interaction of the
market forces Demand and Supply.

Resources switch from products that are becoming less

popular to ones that are becoming more popular.

Consumers signal to producers their changes in demand

through the prices they are prepared to pay for different
products
 The Role of the Price Mechanism
Market economy, resources move automatically as a result of changes in
price.. Price changes are determined by the interaction of the market forces
of demand and supply.
The Price Mechanism also rations out products
Price Mechanism provides incentive for producers to
when their supply falls short of demand. If for
respond to changes in the market conditions. If consumers
example, a disease attacks a potato crop,
want more of a product what will happen? Discuss in your
supply will decrease. May result in a shortage
groups.
in demand exceeding supply. This shortage
They will pay more! This encourages firms to produce a however will drive prices up. Until the market
larger quantities as it earns them more profit. again clears with demand equalling supply.
The price mechanism sorts out who will receive
Use of resources changes all the time in response to the products by raising the price. The people
changes in demand and costs of production. Market who will be able to consume the product will be
Equilibrium moves to Market Disequilibrium and back to those who are able to pay the higher prices
market equilibrium again. .
 Activity 1
Decide which of these
products bring a higher
price and why?

Rice VS Gold
Football World Cup
VS Local football Ticket
Ticket
Soil VS Platinum
Demand and Supply Curve Market Equilibrium
 Summary : The Roles of Markets in Allocating
Resources
The three key allocation
decisions are what to produce,
how to produce it and for whom The market system relies on the
to produce it. price mechanism to allocate
resources.
The main factors that determine
the type of economic system are
who decides; whom produced, Price will rise if demand
how resources are allocated, increases or supply decreases.
and who owns the capital and
land
 A little Sub unit comprehension

Follow the link to google forms

and answer to the best of your Remember don’t look at your
knowledge. notes, read the questions
carefully and try to use your
Remember that each mark in knowledge to answer.
Cambridge is around 1.5
minutes. So this little worksheet
10 minutes to go.
is worth 4 marks for 6 minutes.
As we are online I’ll give you 8
Minutes.
 Demand
Learning objectives:
The Role of
Define demand
Draw a demand curve Markets in
Recognise the link between individual
and market demand in terms of Allocating
aggregation
Distinguish between extensions and Resources
contractions in demand Unit 2.3 Chapter 7 Demand
Analyse the causes of shifts in the
demand curve
 First a Great
Little Video to
Learn about
Supply and
Demand
Remember to take notes, and think of
some questions to ask after it has
finished.
 Definition of Demand

In your groups come up with a definition of

demand They define this as above, the willingness
and ability to buy a product.
Key Term: Demand - the willingness and
An individual may want a product, but if they
ability to buy a product
cannot afford it, their demand is not effective
as a firm will not be prepared to sell it to them
When economists discuss demand, they are
discussing effective demand.
 Demand and Price

Demand and price are inversely related.

What will rise if prices fall?

Demand!

What will happen if there is a higher price?

Fewer people will be able to afford to buy a
product.

As prices rise the willingness and ability to

buy a product falls.
 Individual and Market Demand

Economists study both individual and, more We find this by totalling up by adding up
commonly, Market Demand. each individual’s demand at different prices.

Individual demand is the amount of a

product an individual would be willing to buy This totalling up is called aggregation
at different prices.

Key Term: Aggregation - the addition of

Key Term: Market Demand - total demand for
individual components to arrive at a total
a product
amount.
 Individual and Market Demand

A demand Schedule

Demand schedule lists the different

quantities demanded of a product at
different prices over a particular time period.

In your groups discuss what you notice about

the demand schedule for tickets on trains
from Hanoi to Ho Chi Minh City
 Individual and Market Demand

A Demand Curve
Exam Tip: When answering question on
demand and supply, it is useful to draw a
diagram:. They must be: accurately draw and
fully labelled. Large and clear. Try use one
third of an A4 page.
Let’s look at the full range of demand and
price for our train tickets.
Let’s head over to classkick and choose a
product and create a demand schedule.
Followed by a diagram based on your hotel.
Firms never usually charge such a high price
there is zero demand so curves don’t usually
reach the axis.

This curve shows the price, $90, at which

people would no longer buy tickets. It has
been priced out of the market.
 Individual and Market Demand

A Demand Curve

This curve shows the price, $90, at which

Why do we never really see a
people would no longer buy tickets. It has
demand curve reach the axis?
been priced out of the market.

Firms never usually charge such

a high price there is zero
demand so curves don’t usually
reach the axis.
 Individual and Market Demand

Straight Line Demand Curve

Often economists will draw
They don’t usually show exact quantities and
demand curves as a straight
prices, but are used to show more general
line for the sake of clarity (keep
relationship between demand and price.
it simple) and save time.

They are also used to illustrate

the effect of price change on
demand.
 Individual and Market Demand
The Effect of a Change in Price on
Demand
A fall in price is likely to lead to
This shows that a fall in price from P to P,
a rise in demand for that
has caused to extend from Q to Q.
product or service.
Extension Contraction
Economists refer to this as extension in
demand, AKA expansion in demand or an
‘increase in quantity demanded’.

Seeing these phrases above will tell

economists that a change in demand is a
Contraction in Demand: a fall in the quantity
change in the price of the product itself, as
demanded caused by a rise in the price of the
seen on the left.
product itself. Demand contracts from Q to Q as
a result of rise in price P to P.
 Activity : Price Decrease

Add this to your demand curve project. Draw your axis and illustrate the changes on the
demand curve, then identify whether demand has extended or contracted.
 Conditions of Demand

Price is not only influenced by demand!

Here’s the demand schedule to help you.

What else do you think could influence An increase in demand is shown by a shift to
demand, discuss in your groups. the right, for example a hot day.
Range of causes for the change in demand -
more or less of a product being demanded.
What could influence the demand for ice Demand can
cream? decrease too,
Let’s look at a new demand schedule for ice which shows
cream, and ldraw our own demand curves a shift to the
using straight line demand curves. left.
 Conditions of Demand

Top Tip: Be careful to distinguish between a

Key Term: Changes in Demand - shifts in the
movement along a demand curve and a
demand curve
shift in demand. The only thing that can
cause a movement along a demand curve
Key Term: Increase in Demand - a rise in is a change in the price of the product
demand at any given price, causing the itself. Anything else that causes demand to
demand curve to shift to the right change would be shown by a shift in the
demand curve
Key Term: Decrease in Demand - a fall in
demand at any given price, causing the
demand curve to shift to the left
 Conditions of Demand

What are the factors that can cause

consumers to demand different quantities of
products?

● Changes in Income
● Changes in the price of related
products
● Advertising Campaigns

● Changes in population

● Changes in taste and fashion

Conditions of Demand: Changes in the price of
related products
Advertising Campaign: A successful
advertising campaign will increase
demand for a product. It may bring the
product to the notice of some new
consumers and may encourage some
existing consumers to purchase more
quantities of the product.
What are some ways we can advertise a
product?
Let’s get creative. I want you to head to
canva and design a new product. Create
a poster that will catch the attention of
new consumers and encourage them to
buy your product.
Then we are going to save the image to a
google doc and submit it via google docs.
Present your product and try to sell it to
us, let’s see who would buy it and who
can make the most sales.
 Demand Curve Review
What happens if price of a product rises to Quantity demanded falls because less
the quantity demanded? people can buy it..
When this happens, does demand for the Contraction
Demand contracts
product contract or extend?

What happens if price of a product falls to the Quantity demanded rises because more
quantity demanded? people can buy it.
When this happens, does demand for the Demand Extends Extension
product contract or extend?
 Conditions of Demand: Changes in Income

An increase in income raises consumers’ Normal Goods: a product whose demand

purchasing power. For most products this increases when income increases and
results in an increase in demand. decreases when income falls.

So common is this positive relationship

between income and demand that such
products are referred to as normal goods.
A few products have a negative relationship Inferior Goods: a product whose demand
with income. These products are called decreases when income increases and
inferior goods, when incomes rise demand demand increases when income falls.
falls as consumers switch to better quality
products. .
Conditions of Demand: Changes in Income
Conditions of Demand: Changes in Income

Let’s head to classkick and add this to our

demand curves.
 Conditions of Demand: Changes in the price of
related products

An increase in demand can be caused by a rise in the in the price of a substitute product

Key Term: Substitute - a product that can be used in place of another. For example…..
If demand for holidays in Danang rises, demand for holidays in Phu Quoc will fall as it is seen as
similar or comparable.
Demand will increase if the price of a compliment falls.
So if travel insurance, closely related to the travel market, falls. Demand for most holiday destinations
will increase.

Can you think of a good example of a substitute product that could raise demand?

How about the fall of a compliment in raising demand, can you think of another example?
 Conditions of Demand: Changes in the price of
related products

Decide whether if these items are a substitute or compliment to a Toyota car?

a) Public Transport
b) Petrol
c) Ford car
 Conditions of Demand: Changes in the price of
related products

Decide in your groups whether the following would cause an extension in demand, a contraction in
demand, an increase in demand or a decrease in demand for fish in each country?

a) A Price rise in fish

b) A report that eating fish reduces heart disease
c) Net emigration
d) A fall in the price of chicken
 Quizlet Time

https://quizlet.com/gb/538210015/demand-c
urves-flash-cards/
Make a note of what you don’t know.
Everybody follow the link to our quizlet page
and let’s see who wins!
 Summary Chapter 7 Demand
● A fall in the price of a product will make more people more willing to buy it

● A demand schedule lists, and a demand curve shows, the different quantities of a
product that would be demanded at different prices
● An extension in demand is caused by a fall in the price of the product whereas a
contraction is caused by a rise in price
● Causes of change in demand include changes in income, changes in the price of
substitutes and compliments, advertising campaigns, changes in the size and age
of composition of the population and changes in taste and fashion

● An increase in demand shifts the demand curve to the right

● An decrease in demand shifts the demand curve to the left

 Summary Chapter 7 Demand Review
How do we define demand?

The willingness and ability to buy a product

Can you explain effective demand?

If a consumer can afford to buy the product then the demand is effective. If they can’t
then it is not effective demand. Economists focus on effective demand.
What two factors do we have to consider when we think about demand?

Price and Quantities demanded.

What do we call the table where we can show this
information (not a demand curve)?
A demand schedule.
 Summary Chapter 7 Demand Review
When drawing an accurate demand curve using this information, will we see a curve or
straight line?
Curve
Demand is the relationship between which
two factors?
Price and Quantities Demanded
When economists want to keep this relationship and show demand in a simple way and
save time, will we see a curve or straight line?
Straight line
 Summary Chapter 7 Demand Review
What happens to demand when prices fall and what do we call it an extension or
contraction in demand?
Demand rises and we see an extension in Extension
Demand Extends
demand.

What happens to demand when prices rise and what do we call it an extension or
contraction in demand? Contraction
Demand falls and we see a contraction in Demand contracts
demand. Imagine a snake squeezing
tighter because less people can buy the
product.
 Summary Chapter 7 Demand Review
What are the factors that can cause consumers to demand different quantities of
products?
Changes in Income, changes in the price of related products (substitutes and
compliments, advertising campaigns, changes in population, changes in taste and
fashion.
For most products when income rises consumers have more purchasing power so
demand for these products rises! What do we call these products?

Normal Good: A normal good is a good that experiences an increase in its demand due
to a rise in consumers' income.
For some products demand falls because consumers can buy better quality products,
what are they called?
Inferior Good: Inferior goods are often lower price substitute goods that demand will fall
for when consumers have more income.
If you had more money would you eat packet noodles or go to a good restaurant and eat
Ramen?
 Summary Chapter 7 Demand Review
What is a substitute product?
A product that can be used in place of another.
This is because we see them as the same or similar, for example a Toyota Car and a Ford
Car. So if a substitute product is released onto the market, let’s say the Ford car, people
will think ‘oh I can buy this instead of the Toyota’. Therefore demand for the substitute
product will rise. The demand for the original product will fall.
Is this good for the consumer?
Yes because it provides competition, Toyota will have to lower their prices to compete
with Ford.
What is a compliment product?
Goods that are consumed together, like pencils and pencil sharpeners. When the price of
one decreases the demand for the other increases!
 Summary Chapter 7 Demand Review
Price is not the only influence on demand, many other factors such as weather, holidays,
new laws, fashion and trends etc. Let’s think about Ice cream and the shift in demand
due to weather. Normal Weather Hot weather

An increase in demand is shown by a shift to the right, for Demand can decrease too, which shows a shift to the left, for
example a hot day. example on a cold day where people don’t want ice-cream.
 Summary Chapter 7 Demand Review

Let’s now look at supply!