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Relative Scarcity
The comparison of the scarcity of one good, service, or resource to that of another.
Opportunity Cost
the most desirable alternative given up as the result of a decision
Production Possibilities Frontier (PPF)
a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology
trade-off
an alternative that we sacrifice when we make a decision
What to produce?
What kinds of services and goods should be produced?
How to produce?
The process of good creation is decided by efficiency and social values
Whom to produce for?
For those with monetary votes.
Traditional Economy
An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.
pure market economy
an economic system with no government so that private firms account for all production
pure planned economy
An economic system where all decisions regarding production, distribution, and pricing are made by the government.
mixed economy
An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion.
Two-sector circular flow model
A simple model of how the economy works that shows the interactions between business and households
Three Sector Circular Flow Model components
Households, businesses, and government are the three main components of the Three Sector Circular Flow Model, illustrating the flow of goods and services in an economy.
Australian Competition and Consumer Commission (ACCC)
An institution set up to promote competition in markets
Government Disincentives
Government regulation and law/use of taxes
Government incentives
subsides/tax rebates
economic decision making
the process of choosing which needs and wants will be satisfied
Wants
things that add comfort and pleasure to your life
Needs
things that are required in order to live
Labour resources
the people that provide their skills, effort and knowledge to the business
capital resources
The tools, equipment, and buildings that are used to produce goods and services
natural resources
Materials or substances such as minerals, forests, water, and fertile land that occur in nature and can be used for economic gain
positive economics
the branch of economic analysis that describes the way the economy actually works
normative economics
makes prescriptions about the way the economy should work
Microeconomics
the study of how households, firms, and industries make decisions and how they interact in markets
Macroeconomics
the study of economy-wide phenomena, including inflation, unemployment, and economic growth
Economic agents
main decision makers in an economy (e.g. Government in Australia)
traditional consumer behaviour
Consumers act rationally, Customers make informed decisions, Customers maximise utility, consumers have preferences
Purpose of economic activity
To produce goods and services to satisfy needs and wants and thereby improve economic welfare
Material living standards
standards that can be easily measured in terms of income per person, or consumption or purchase of goods and services
Non-material living standards
The aspects of a person's quality of life that cannot be measured by monetary factors.
business sector
The segment of the economy that involves the creation, production, and sale of goods and services to satisfy consumer needs. It encompasses various industries and plays a crucial role in economic growth.
cost-benefit analysis
Analytical process to weigh potential benefits against costs to determine if an action or decision is worthwhile or feasible. Helps in making informed choices.
economic activity
Refers to all actions that involve the production, distribution, and consumption of goods and services within an economy.
underemployment
A situation where individuals are employed below their skill level or working part-time when they desire full-time employment.
price system
Mechanism where prices of goods and services are determined by supply and demand in a market economy, guiding resource allocation efficiently.
traditional viewpoint of business
profit maximisation
traditional economic viewpoint of the government
maximisation of living standards
The role of government in economic stabilisation
The government's actions to manage economic fluctuations and promote stability through fiscal and monetary policies/Government spending
Flow 1
The value of resources sold by households to businesses
Flow 2
The value of incomes paid by businesses to households
Flow 3
The total value of spending or demand by households and governments
Flow 4
The total value of all final goods and services produced or level of economic activity (GDP) to businesses
Marginal Utility
The additional satisfaction gained from consuming one more unit of a good or service. It diminishes as consumption increases.
Note
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