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Cost Benefit Analysis
A comparison of the expected costs and the expected benefits of a particular course of action or project. Government uses this to decide on project viability.
Marginal Propensity To consume
Measures the change in consumption, that would result from a one dollar increase in income. (a number between 0-1). determines how much person or household is likely to spend on consumption (goods and services) rather than save. e.g Someone getting a pay raise and deciding how to spend it.
Budgetory policy
The manipulation of the level of composition of federal governments receipts and outlays in order to assist in the achievement of its economic and social goals for australia.
Monetary Policy
A policy operated by the RBA on behalf of the government and involves the manipulation of key financial variables in the economy (primarily interest rates) in order to achieve specific economic goals and ultimately improve living standards and welfare of all Australians.
Consumer Sovereignty
Where consumers primarily determine what will be produced via their purchasing decisions. Effects the use of resources and economic decisions made by businesses/governments.
Production
Process of converting resources and inputs into goods and services, or the total volume (or value) of goods and services produced over a given time period. Apart of the production, income and expenditure period.
Income
Money that is typically that is typically received on a regular or recurring basis. (e.g. wages and salaries)
Dynamic efficiency
How quickly resources can be reallocated from one activity to another
Expenditure
An alternative word for ‘spending’ or ‘demand’.
Relative Scarcity
A situation where resources are limited compared to demands placed upon those resources via wants and needs
Allocative efficiency
A type of efficiency measured by how well resources are being allocated in the economy, where living standards/welfare are maximised.
Marginal Utility
The satisfaction that consumers gain from consuming an additional unit of a good or service.
Technical efficiency
When its not possible to increase output without increasing input. (resources)
Production is at maximum but costs are at a minimum
Material Living standards
Living standards that are measured by access to goods and services.
Non material Living standards
The aspect of a persons quality of life that cannot be measured by monetary factors.
Intertemporal Efficiency
How well resources are allocated over different time periods. stable balance between current consumption and future consumption
Economic activity
Volume (or real value) of production employment income and expenditure in an economy.
Positive economics
Fact based economic statements
Normative economics
Economic statements based upon opinions or value judgements.
Externalities
An externality arises when the production or consumption of a good or service has an effect
(positive or negative, third party or bystander - someone not part of the transaction)
Oppurtunity cost
The value of the next best alternative that is foregone whenever a choice is made. Sometimes referred to as an economic cost
Economic Agents
An entity, such as a person, household, government or business that makes economic decisions
Net benefits
Benefit less costs. Can either be positive or negative
Trade-offs
Foregoing the opportunity to gain something of value with our time or money once we use our time or spend money on some other activity (or goods and services)
