Unit 1: Introduction to Economics

Scarcity

the situation in which available resources (factors of production) are finite but our wants/needs are infinite

Sustainability

is maintaining the ability of the environment and the economy to continue to produce and satisfy needs and wants into the future.

FoP - factoes of production

Land - Labour - Capital - Entrepreneurship

Opportunity cost

the value of the next best alternative that must be given up to obtain something else.

Market method

resources are owned privately and it’s up to producers and consumers to make economic decisions.

Command method

resources are owned by the government and it’s up to them to make economic decisions.

Production possibilities curve (PPC)

represents all combinations of the maximum amounts of two goods that can be produced by an economy, given its resources and technology, when there is full employment of resources and efficiency in production.

(PPC) - assumptions

All resources are being fully employed + All resources are being used efficiently

Economic growth

the increase in the quantity of output produced in an economy over a period of time

Actual growth

caused by reduction in unemployment and increases in efficiency in production.

Growth in production possibilities

caused by increases in the quantity or quality of resources (factors of production).

Leakages

are withdrawals from the economy and come in the form of savings, taxes, and imports.

Injections

are investments into the economy and come in the form of investments, government spending, and exports.

Positive economics

study of economics based on the scientific method

Normative economics

forms the basis of judgements about what economic goals and economic policies ought to be.