Year 10 HASS - Economics Revision

Want

Not necessary for survival

Need

Necessary for survival

Economic problem / Scarcity

unlimited needs and wants and limited resources

Economics

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

Microeconomics

the study of how households and firms make decisions and how they interact in markets

Macroeconomics

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

GDP

Gross Domestic Product - the total market value of all finished goods and services produced annually in an economy

Opportunity cost

the best alternative given up by making a decision

Relative scarcity

Resources are scarce compared to society's unlimited needs and wants

What are the three basic economic questions?

1. What to produce?
2. How to produce?
3. For whom to produce?

2. How to produce?

3. For whom to produce?

The business cycle

Expansion, Peak, Contraction, Trough

Boom / Expansion / Recovery

A period of economic growth as measured by a rise in real GDP

Peak

When the economy is producing at maximum capacity

Recession

a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in real GDP in two successive quarters.

Trough

The lowest point in GDP, fiscal and monetary intervention required

PPF

production possibilities frontier

What can move the PPF?

1. Change in productive resources
2. Technology

2. Technology

Law of increasing opportunity cost

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

GDP formula

Consumption + Investment + Government Purchases + Net Exports

Law of demand

↑ Price → ↓ Demand

Law of supply

↑ Price → ↑ Supply

Equilibrium Price

QD = QS

Excess / Surplus

QS > QD

Shortage

QD > QS

Factors affecting demand

Price, Population, Preferences, Prices of Substitutes, Prices in Future

Factors affecting supply

Price, Production Cost, Price in Future, Number of Suppliers, Technology, Availability of resources

Real GDP

GDP adjusted for inflation by using the same price over time

Real GDP per capita

Real GDP / Population