economics concepts I don't understand

shift right in PPF curve

shows future production

shift left in PPF curve

resource allocation is becoming inefficient, unemployment is occurring

capital widening

employing resources in a way that leads to the expansion of the range of goods and services being sold

capital deepening

improving/developing goods or service offering to reach a wider audience

Income (Y) \=

Consumption (C) + Savings (S)

excludability

the property of a good whereby it is limited to customers

transferability

The costs involved in moving goods from one place to another

GDP \=

C + I + G + (X-M)

business sovereignty is raised through:

marketing, misleading/deceptive behaviour (e.g. not getting back a promise), planned obsolescence (Apple), anti-competitive behaviour (competitive businesses working together)

disposable income

proportion of income after induced expenditure has been fulfilled

dis-saving

when expenditure \> income

average propensity

proportion of total national income thats either spent or saved.

APC \=

consumption/income

APS \=

saving/income

marginal propensity

Look at how much extra dollar of income an individual is willing to spend or save

MPC \=

change in consumption/change in income

MPS \=

change in saving/change in income

factors that influence the spending and saving decisions of individuals

culture, personality, confidence + future expectations (security in job), future spending plans, tax policies, availability of credit

utility

the level of satisfaction or pleasure that people receive from their choices

factors that affect the choices individuals make

income, price of g\s, price of substitute goods, price of complements, preferences, advertising

greatest to smallest contributors of Australia's consumer income

wage \> welfare \> rent \> interest \> profit

firm

a business organisation involved in using entrepreneurial skills to combine factor inputs to produce goods and services for sale

types of industries

primary, secondary, tertiary, quaternary, (IT services), quinary (personal or domestic services are sold)

productivity

the quantity of g/s an economy can produce with a given amount of inputs over a period of time

types of efficiency

technical (reducing cost), allocative (directing inputs to consumer demand), dynamic (adjusting resource use to changes in eco environment)

how can productivity be raised?

specialisation, improvements in level of human capital, investment into capital goods

advantages to productivity being raised

less wastage, higher profits, higher income and living standards, international competitiveness improved

disadvantages to productivity being raised

structural unemployment, reduction in human capital

economies of scale

factors that cause a producer's average cost per unit to fall as output rises (GOOD)

diseconomies of scale

increases in cost per unit when output increases (BAD)

difference between internal and external (dis/economies of scale)

internal \= firm controls, external \= beyond firm's control

internal economies of scale

The cost benefits that an individual firm can enjoy when it expands.

examples of internal economies of scale

division of labour, using cheaper alternatives for resources

goals of the firm

- Maximising profits
- Meeting shareholder expectations
- Increasing market share (proportion of market population)
- Maximising growth (increase in revenue -\> reinvest capital into business)
- Satisficing

cost-saving advantages of internal economies of scale

more capital for research into innovative products, investment into capital equipment

internal diseconomies of scale

cost saving disadvantages that result from a firm expanding its scale of operations

examples of internal diseconomies of scale

bad industrial relations, increase in salary demands

law of diminishing returns

as additional increments of resources are added to producing a good or service, the marginal benefit from those additional increments will decline

disadvantages of internal diseconomies of scale

complicated decision making processes, efficiency declines

long run average costs (LRAC) curve

internal economies of scale - costs decrease, output increase
internal diseconomies of scale - costs increase, output increase
external economies of scale (shift in) - cost decrease, output increase
external diseconomies of scale (shift out) - cost increase, output increase

external economies of scale

The cost benefits that all firms in the industry can enjoy when the industry expands

examples of external economies of scale

growth of firm's industry, increased competition in capital market, government supplied services

external diseconomies of scale

disadvantages that result from the growth of the industry in which the firm is operating

examples of diseconomies of scale

growth in industry raises demand -\> inflation of factor inputs, increased government regulation

Technical optimum

The most efficient level of production for a firm. At this point, average costs of production are at their lowest possible level.

impact of investment, technological change and ethical decision-making

- production methods (increased efficiency, structural unemployment)
- prices (reduced cost of production \= lower prices for consumers)
- employment (prevalence of labour-capital substitution)
- output (more output and exports)
- profits (new technology → decrease long run average costs)
- type of products (more innovative products)
- globalisation (accelerated exports and freer movement of goods)
- environmental sustainability (renewable energy practices adopted)