Year 10 HASS - Economics

Need

Necessary for survival.

Need

Unnecessary for survival.

Economics

The field of study of how people allocate their scarce resources to best satisfy their unlimited needs and wants.

Microeconomics

Economics from an individual POV, covers the theory of supply and demand.

Macroeconomics

Economic performance as a whole. Covers economic growth and the business cycle.

3 Economic Questions

• What & how much…

• How…

• For whom…

…to produce?

Economic Problem

Unlimited needs and wants and limited resources.

Opportunity Cost

The value of the best alternative given up in a decision.

Relative Scarcity

Resources are limited compared to society’s unlimited needs and wants.

Trade-Off

A situation where a person or group has multiple options, from which can only choose one, and forfeiting the others as a result.

Types of Resources

Land, Labour, Capital, Enterprise.

Types of Economies

Traditional, Command, Market, Mixed.

GDP

Gross Domestic Product - the total market value of all final goods and services produced in an economy in a year.

Formula for GDP

Consumption + Investment + Government Purchases + Net Exports.

GDI (acronym + formula)

Gross Domestic Income. Rent + Wages + Interest + Profit.

Finished Good

A good that won’t be sold again as part of another good.

Nominal GDP

GDP calculated using raw numbers.

Real GDP

GDP adjusted for inflation by using the same prices over time.

Production Possibility Frontier

A graphical representation of how much of two different goods an economy is capable of producing.

Law of Increasing Opportunity Cost

Every additional unit of production of one good requires sacrificing an increasing amount of production of the other good.

What can alter the PPF?

1. Change in productive resources.

2. Technology.

How is underemployment indicated on a PPF?

Points below the frontier indicate underemployment.

What does the edge of a PPF show?

Maximum economic output.

What does a point above the PPF show?

Impossible levels of production.

Economic Expansion (PPF)

Indicated by moving towards the frontier from below.

Economic Growth (PPF)

Represented by an outward shift in the frontier.

Consumer Surplus

The difference between how much a consumer would pay and a product’s market price.

Excess (S&D)

Q_S > Q_D

Shortage (S&D)

Q_D > Q_S

Inferior Good

A good where demand drops as income rises.

Substitute Goods

Goods where the rise in price of one causes a rise in demand for the other.

Complement Goods

A good where a rise in price of one causes a drop in demand for the other.

Consumer and Producer Incentives

Consumers want savings. Producers want profit.

Demand Shifters

IPRET: Income, Population, Related Goods, Expectations, Tastes

Supply Shifters

TIETEC: Tech, Input Price, Expectations, Tax, Entry & Exit, Changes in Opportunity Costs

Movement (also list vocab)

Caused by a in price, uses the words ‘expand’ and ‘contract’.

Shift (also list vocab)

Not caused by a change in price. Uses the words ‘increase’ and ‘decrease’.

The Business Cycle

Fluctuations in the economy in terms of output and growth.

What are 5 fluctuating factors in the business cycle? (you’ll have to manually override incorrect results)

WEIR: Wages, Employment, Inflation, Ratio of D:S