Introduction to Economics Unit 1

Economics

Is the social science that studies the choices
that individuals, businesses, governments and entire
societies make as they cope with scarcity and the
incentives that influence and reconcile those choices.

Microeconomics

Is the study of choices that
individuals and businesses make, the way those
choices interact in markets and the influence of
governments.

Macroeconomics

Is the study of the performance of
the national and global economies.

Goods and services

Are the objects that people value
and produce to satisfy human wants.

Factors of production

Land, Labour, Capital and Entrepreneurship

Land

Earns rent

Labour

Earns wages

Capital

Earns interest

Entrepreneurship

Earns profit

Equity

Is fairness, but economists have a variety of views
about what is fair.

Globalisation

Means the expansion of international trade,
borrowing and lending, and investment.

• Is in the self-interest of consumers who buy
  low-cost imported goods and services in the self-interest of the multinational firms that produce in
  low-cost regions and sell in high-price regions.

Information Revolution

The technological change of the past forty years has been
called…

A Choice Is a Trade-Off

The economic way of thinking places scarcity and its
implication, choice, at centre stage.

• You can think about every choice as a trade-off – an
  exchange – giving up one thing to get something else.

Making a Rational Choice

Is one that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice.

Benefit: What you Gain

• The benefit of something is the gain or pleasure that it
  brings and is determined by preferences.

• Preferences are what a person likes and dislikes and the
  intensity of those feelings.

Opportunity Cost

The __ of something is the highest-valued
alternative that must be given up to get it.

Choices Respond to Incentives

A change in marginal cost or a change in marginal benefit
changes the incentives that we face and leads us to
change our choice.