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ECO 1010F - The Capitalist Revolution Notes
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ECONOMICS WEEK 1 - NOTESUNIT 1: THE CAPITALIST REVOLUTION
1. Inequality
2. Hockey-stick growth
3. Capitalism
4. Economics
INCOME INEQUALITY, LIVING STANDARDS, HOCKEY-STICK GROWTH
13/2
Economics = the study of how people interact with each other and with
the natural environment, in producing their livelihoods.
Stable and then escalates quickly due to the new economic system
(Capitalism) and the roles of private property, markets and firms.
Capitalist revolution
Growth stagnant
o No industrialisation – production remained relatively the same
o Weren’t placing high value on education
o Subsistence farming and focus on agriculture
o Before 1750: agriculture 90%
o Industrialisation to 1900: agriculture 30%, manufacturing 50%
and services that help with
both 20%
o Now: agriculture is <5%
Why industrial revolution started
in UK
o Colonialism and imperialism
o Diversify economy and spur
growth
o China grows so late: closed
off to rest of world
(communism), impact of
war and cultural differences
Why war can spur growth
o Build weapons
Great Depression: 1920s, leads to decline and loss of jobs, standard
of living etc
Recession: negative growth for two consecutive quarters
Depression: sustained period of economic contraction (more than 2
quarters)
Inflation: purchasing power of money declines, value of money
declines (SA: 6%)
Real GDP
Adjusted to take out inflation
GDP per Capita
, - Used to compare living standards in each country.
- GDP is the total value of everything produced over a certain period;
therefore GDP per capita corresponds here to average income.
Three measures of tendency in statistical distribution:
Mean
Median
Mode
1.1 INCOME INEQUALITY
o The world was flat (1000 years ago), economically speaking due to
the small differences in income between the regions of the world.
o Measure inequality using the 90/10 ratio, which is the average
income of the richest 10% over the average income of the poorest
10%.
1.2 MEASURING INCOME AND LIVING STANDARDS
The estimate of living standards (GDP per capita) is a measure of
the total goods and services produced in a country, which is then
divided by the country’s population.
GDP measures the output of the economy over a given period (a
year).
Disposable Income
Disposable income is the amount of wages or salaries, profit,
rent, interest and transfer payments from the government, or
from others, received over a given period minus any transfer
the individual made to others.
Disposable income leaves out: quality of social and physical
relationships, amount of free time, goods and services
provided by government and goods and services produced in
household and is therefore insufficient in measuring out
wellbeing.
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