Intro to Economics

IB Econ SL

Need

things we need to survive 

Want

things we want but aren’t necessary to survive

Microeconomics

behaviour of individual agents within an economy

Macroeconomics

sum of all microeconomic parts

Scarcity

where finite factors of production are insufficient to satisfy unlimited human needs and wants

Opportunity cost

The next best alternative foregone

Efficiency 

Maximising output while minimising input

PPC/PPF

A curve showing the maximum combinations of 2 goods within an economy at a given time, if all resources are being used fully and efficiently.

Economic Growth

Ability to produce more goods and services within an economy.

Actual Growth 

Movement of a point within the PPC curve closer to the PPC curve

Economic growth in the long run

An outward shift of the PPC curve (increase in quality/quantity of factors of production)

Factors of production

Land, Labor, Capital, Enterprise 

Circular flow of income 

An economic model that illustrates the flow of income in an economy

Closed economy

An economy with no links to other countries

Open economy

When an economy has international trade

Interdependence

A system where people rely on others because they cannot produce everything efficiently themselves

Physical Capital

Human effort, as a means to produce more output 

Human Capital (capital)

Skills, abilities, and knowledge acquired by the people. Also levels of health.

Natural Capital Goods

Land and natural resources 

Financial Capital

Investment in financial instruments (shares, funds,etc) that allow you to buy financial instruments.

Equity

The benefits of resources are distributed fairly.

Free Market Economics

All factors of production are in private hands 

Positive economics

What the economy is now. 

Normative economics

What the economy ought to be.

Land

natural resources available

Labor

physical/mental effort used in production

Entrepreneurship

Managment, organisation, and planning of the other factors of production

The three economic questions

What to produce? How to produce it? How to allocate the product?