Futureprenuer CAT 2 REVISION

Scarcity & Choice

Scarcity refers to the limited availability of resources that forces individuals and societies to make choices about how to allocate them. Choice involves opportunity costs, which represent the benefits of the next best alternative forgone when a decision is made.

Supply & Demand

Supply and demand are economic concepts that determine prices in a market. Demand refers to the desire for a product or service, while supply relates to the availability. Imbalances, such as shortages and surpluses, directly affect pricing. Real-world examples include the PS5 release, where high demand and limited supply led to increased prices.

Economic Indicators

Economic indicators such as GDP (Gross Domestic Product), unemployment rates, and inflation are statistical metrics used to assess economic performance. These indicators establish cause-and-effect relationships, influencing various economic policies and decision-making.

Circular Flow of the Economy

The circular flow of the economy illustrates how money, goods, and services circulate between households, businesses, and the government. It includes trade (imports and exports), leakages (such as savings, taxes, and imports), and injections (like investment, government spending, and exports).

Fiscal & Monetary Policy

Fiscal policy involves government spending and taxation decisions to influence economic activity. Monetary policy relates to managing interest rates and money supply by institutions like the Reserve Bank of Australia (RBA). Changes in interest rates impact borrowing costs and, consequently, economic growth.

Exchange Rates

Exchange rates represent the value of one currency relative to another, such as the appreciation or depreciation of the Australian Dollar (AUD). These fluctuations create winners and losers among consumers and businesses, particularly affecting imports and exports.

Globalisation

Globalisation is the process through which businesses develop international influence, leading to benefits such as lower prices, increased choices, and business growth through tourism and trade. However, it can also result in job losses, increased competition, economic dependence, and unequal benefits. The Australian car manufacturing example illustrates the complexities of globalisation's effects.