2. Economics
is the study of how we make the
best possible use of scarce
resources in order to satisfy the
needs and wants of as many
people as possible.

3. You can’t have it all!

4. Factors of production
Land Labour
Capital Enterprise

5. Land
• Anything provided by
nature that helps us
produce G&S
• E.G. Sea
Soil
Gas
• Payment: Rent

6. Labour
• Any human effort
that helps to produce
G&S
• E.G. Doctor
Accountant
Factory worker
• Payment: Wages

7. Capital
• Anything that is
made by humans that
is used to help
produce G&S
• E.G. Machinery
Computers
• Payment: Interest

8. Enterprise
• Organises land labour
and capital by setting up a
business and bears the
risk of success or failure
• E.G.
Entrepreneur
• Payment: Profits

9. Economic Systems

10. Mixed Economy
 Most of the decisions
regarding the factors of
production are made by the
private sector
 Some industries controlled by
the government (Essential
services)

11. Free Enterprise
Economic choices about
factors of production made
by private sector
- Government has little
intervention
- Capitalism

12. Centrally Planned
- Government controlled
economy
- Gov decides what is
produced and by whom
-Little intervention by private
sector

13. Consumer Choices!
Opportunity Cost
The item that you do without when
you have to make a choice between
two items. The items you choose is
the financial cost

14. Example
The government has €100 M to spend on
building a new or a new
As advisor what do you advise?

15. Economic Growth
Is the increase in the
production of goods &
services from one year to
the next

16. GDP
Gross Domestic Product
The total value of all G & S produced in a
country in one year

17. Gross Domestic Product
FORMULA
Increase in production x 100
Year 1 production 1
Example 1
Production Year 1 - €15,000
Production Year 2 - €17,000
Difference = €2,000
€2,000 x 100
€15,000 1
= 13.3%

18. Example 2
Calculate the GDP
Production Year 1 - €50 billion
Production Year 2 - €52 billion
Example 3
Calculate the GDP
Production Year 1 - €64 billion
Production Year 2 - €68 billion

19. GNP
Gross National Product
GDP minus profits sent out of country by
foreign owned companies plus profits
returned to Ireland by Irish firms abroad

20. High Economic Growth
Benefits:
1.Improved standard of living: Access to
increased quantity & quality of goods
2. Creates Employment: Demand for G&S
increases
3.Increases revenue for Gov: Increase in
taxes

21. Low economic growth:
Disadvantages
1. Wages decrease
2. Unemployment increases
3. Decrease in tax revenue
4. Lack of investment in essential
services

22. Inflation
An increase in prices of
goods and services
from one period to the
next.
- Inflation is measured
by the (CPI) Consumer
Price Index.

23. Inflation
Formula
Increase in price x 100
Year 1 price 1

24. Example 1
Calculate the rate of inflation.
Year 1 Cost of Living = €20000
Year 2 Cost of Living = €21500

25. Solution
(21500 - 20000) x 100 = 7.5%
20000

26. Example 2
A family’s weekly grocery bill costs
€111 in July 2010.
If the inflation rate for the year was
11%, what would the bill cost in July
2011?
Solution
Price in 2010 € 111
€111 x 11% = + € 12.21
Price in 2011 = € 123.21

27. Causes of Inflation
1. An increase in the cost of production e.g. rent,
wages
2. If demand for G &S › supply
3. An increase in taxation e.g. VAT
4.The cost of importing goods may increase e.g. oil

28. Effects of low Inflation
1. Cost of Living is cheaper
2.Businesses keep costs to minimum
3.Increase in demand for exports
4.Lower interest rates

30. Reasons for Government intervention
1. Meet minimum needs of Irish people
2. Provide basic services
3. Provide income for people who cant
work

31. 4. Regulate running of businesses

32. The National Budget
Is a financial plan outlining the
Income & Expenditure of the Government

33. Government
Income & Expenditure
Capital Income Capital Expenditure
Current Income Current Expenditure

34. Capital Income Capital Expenditure
Privatisation: Selling of
state assets to the Building new school
private sector
EU Grants Building new roads
Borrowing Building new hospitals

35. Current Income
Income Tax Excise duty
Stamp Duty
VAT DIRT
Corporation Tax Customs Duty
Capital Gains Tax
Capital Acquisition Tax

36. Income Tax PAYE. Tax deducted from workers gross wage
VAT Tax paid on G & S. Two rates: 13.5% & 23%
Stamp Duty Tax paid on the purchase of property. Rate: 1%
Corporation Tax Tax paid on the profits made by companies
Customs Duty/
Tax paid on goods brought in from outside the EU
import duty
DIRT Tax paid on interest earned in deposit account
Excise duty Tax paid on alcohol tobacco and oil

37. Tax on profits made from the sale of an asset e.g.
Capital Gains Tax
buildings
Capital Acquisition Tax Tax on inheritance or gifts

38. Current Expenditure
Nurses pay
Social welfare
benefits
Teachers pay
Garda pay Judges pay
Debt servicing
Doctors pay

39. Place expenditures under correct headings
Department Current Expenditure Capital Expenditure
Department of Health School buildings and NCT Testing
and Children Equipment
Department of Building Prisons, Teachers’ pay, school
Education and Court Buildings running costs
Science
Department of Justice, Building waste Building hospitals,
Equality and Law treatment facilities Clinics, Hospital
Equipment
Department of Garda Pay, Judges Medical cards, Nurses
Environment pay and Doctors pay

40. Solution
Department Current Expenditure Capital Expenditure
Department of Health Medical cards, Nurses Building hospitals,
and Children and Doctors pay Clinics, Hospital
Equipment
Department of Teachers’ pay, school School buildings and
Education and running costs Equipment
Science
Department of Justice, Garda Pay, Judges Building Prisons,
Equality and Law pay Court Buildings
Department of NCT Testing Building waste
Environment treatment facilities

41. Activity
1. Collect a newspaper article
relating to Ireland economy
2. Cut it out and place it in
notebook.
3. Underline key words.
4. Write summary of article.
5. Provide opinion/ recommendation
6. Present to the class

42. Types of Current Budgets
1.A balanced Budget: Income = Expenditure
2. A surplus Budget: Income › Expenditure
3. A deficit Budget: Income ‹ Expenditure
Which of the three is our current budget?

43. Budget 2012:
Income: €39.2 billion
Expenditure: €64.4 billion
Deficit: €25.2 billion
Why?

44. Question
€
Agriculture Service 137
Corporation Tax 77
Customs Duty 24
Debt Servicing * 237
Defence Service 86
DIRT* 139
Education & Science 330
Service
Excise Duty 148
Health & Social Welfare 509
Service
PAYE 619
VAT 170

45. Solution Revenue € €
Corporation tax 77
Customs duty 24
DIRT 139
Excise duty 148
PAYE 619
VAT 170
Total income 1177
Expenditure
Agriculture 137
services
Debt servicing 237
Defence services 86
Ed & Science 330
Health & social 509
service
Total expenditure 1299

46. Revenue
Text book
Pg. 143 Customs Duty 500
Q.20
VAT 800
PAYE 900
DIRT 50
Capital Gains Tax 100
Corp Tax 750
Total Income 3100
Expenditure
Social Welfare Services 1000
Health Services 900
Ed and Science Services 800
Agric Services 500
Debt Servicing 30
Defence Services 250
Total Expenditure 3480
Deficit Budget (380)

47. Revenue
Text book
Pg. 143 Income Tax 7000
Q.21 Customs & Excise 2000
DIRT 600
VAT 6500
Corp Tax 4500
Capital Gains Tax 550
Total Income 21150
Expenditure
Social Welfare 5000
Services
Health Services 4500
Ed & Science 4000
Debt Servicing 90
Agric Services 2500
Equality & Law 2000
Local Gov Services 2400 20490
Surplus 660

48. Sample Question
Revenue & Expenditure €
Social Welfare Payments 800M
Debt Servicing 222M
Customs & Excise Duty 600M
Corporation Tax 500M
Education & Science 300M
Services
Department of Justice 500M
VAT 600M
Income Tax 700M
Q.1 Was this a Surplus or Deficit Budget. Explain.
Q.2 What was the main source of Gov Income?
Q.3 What % of total expenditure was spent on Education
Q.4 Explain two effects of decreasing level of unemployment on
the National Budget.