1.1 Introduction & Nature of Economics

What is an economy?

A system of interrelated production and consumption activities that determine the allocation of resources within a group.

What is economics?

A social science that focuses on the production, distribution, and consumption of goods and services.

What is the fundamental Economic Problem?

Unlimited needs and wants against the scarcity of resources.

What are individual wants?

Desires specific to each person based on preferences and income, such as clothing, housing, and food.

What are collective wants?

Desires shared by a community or society, such as roads, education, and health care.

What are recurring wants?

Wants that must be continually satisfied, like food and water.

What are complementary wants?

Wants that are derived from other wants, such as cars requiring petrol or phones needing cases.

What are the four Factors of Production?

Land, Labour, Capital, and Enterprise.

What is the income from Land?

Rent.

What is the income from Labour?

Wages.

What is the income from Capital?

Interest.

What is the income from Enterprise?

Profit.

What does scarcity in economics lead to?

The need to make choices regarding what to produce, how much to produce, how to produce, and how to distribute production.

What is the Production Possibility Frontier (PPF)?

A curve that illustrates the trade-offs between two goods or services and the opportunity costs associated with choices.