1.0: Intro to Econ

Economics

Study of how resources are distributed to satisfy needs of individuals, governments, and firms

Microeconomics

Category concerning the behavior of individuals and firms in distinct markets and segments.

Macroeconomics

Examines the operation of the economy as a whole

WISE ChoICES

Economic Well-being, Interdependence, Scarcity, Efficiency, Choices, Intervention, Change, Equity, and Sustainabilty

Well-Being

About prosperity and quality of life in the economy.

Interdependence

Refers to growing interaction and reliance on others in order to achieve goals

Scarcity

Resources are scarce (limited in supply) relative to infinite needs and want of individuals and society

Efficiency

How well things are done, determined by the input-output ratio

Choice

The study of choice due to finite resource and infinite wants of individuals and societies

Intervention

Roles and responsibilities of governments in terms of monitoring and regulating the behaviour of working of different markets

Change

Economic change is inevitable

Equity

Idea of perceived fairness

Sustainability

Meeting needs and wants of current generation without jeopardising future generations

Basic Economic Problem

Exists in every economy. This means as a result of scarcity choices have to be made.

Factors of Production (CELL)

4 categorised of production that are required to produce any good or service. (Land, Labour, Capital, Enterprise)

land

Refers to natural resources used in production process

Labour

Refers to human resources required in production process

Capital

Refers to non natural resources used in production process

Enterprise

Refers to skills, creativity, and risk taking ability that a business person requires to combine and manage the 3 other factors

Rewards for factors of production.

Land = Rent
Labour = Wages and salary
Capital = Intrest
Enterprise = Profit
Collectively this is known as income

Scarcity

Refers to finite resources of an economy

Needs

Goods and services essential for survival

Wants

Desire for goods that are not necessary for survival

Goods

Physical product (furniture, etc.)

Services

Intangible products (haircuts, bus trip, etc.)

Economic goods

Goods limited in supply with economic value

Renewable Recources

Factors of production that can regenerate and replenish

Opportunity Cost

Refers to cost of an economic decision, measured in terms of the best alternative choice forgone

Free Goods

Products with a natural wealth of suply and don’t need effort to get them

The basic economic question

1. What production should take place

2. How should production take place

3. For whom production should take place

Private sector

Sector of economy where private individuals and firms produce goods and services

Public sector

Sector where government produces or supplies goods or services

Means of answering economic question

1. Economic System

2. Free market economy

3. Planed economy

4. Mixed economy

Economic system

Way in which economy is organized and run

Free market economy

Reliers on market forces of demand and supply to allocate scarce resources

Planed economy

Government allocates scarce resources. Often associated with communist or socialist economies

Mixed economy

Mix of free and planed market economy

Production Possibility Curve model (PPC)

PPC or PPF is a diagrammatic representation of the max combination of 2 products that a country can produce