Economics

A social science that is typically concerned with the production, consumption and distribution of goods and services.

Economics

The Fundamental Economic Problem

Also known as relative scarcity. This means that society has an unlimited amount of needs and wants, and the resources that are used to cater them are limited.

Legal Tender

A type of payment which is allowed by the law/recognised by the legal system to be valid for meeting a financial obligation.

Characteristics of money

Things that a form of currency needs to have in order to fulfil a specific purpose more effectively. There are seven characteristics:

Divisible

Homogenous

Fungible

Portable

Durable

Relatively scarce

Difficult to counterfeit

Divisible

Able to be divided into smaller parts.

Homogenous

Each unit of money is identical to another in value and appearance.

Fungible

Able to be mutually exchanged by another identical item.

Portable

Able to be easily transported.

Durable

Able to withstand wear and tear.

Relatively Scarce

Limited availability which gives money value.

Difficult to counterfeit

Unable to be forged or imitated.

Functions of money

A standard of deferred payment

A store of value

A unit of account

A medium of exchange

A standard of deferred payment

You can use money to pay things later —- money can be used as credit.

A store of value

Can be saved without losing a lot of value.

A unit of account

Allows prices which can be placed on goods and services using an established rate of exchange.

A medium of exchange

Can be tradeable for goods and services.

Investment

Any mechanism that has the purpose of generating future income with the key aim of getting wealthier.

Investment Options

Shares

Term Deposit

Property

Superannuation

Bitcoin

Shares

Represent part ownership in a company. You can use this to gain more money by selling or keeping it.

Term Deposit

Putting money in a savings account where you lock away a fixed amount of money for a set period (term). You can gain money by this.

Investing in Property

Purchasing and building a real estate in hope of generating profit. Profit can be generated by capital growth (when the estate’s value increases) or by collecting rent from the tenant who lives in that property.

Superannuation

Money saved during your working life to support you in retirement. Employers must make contributions to your super fund, unless if you are self employed.

Bitcoin

A form of digital currency which is a form of payment that does not need third party involvement in financial transactions.

Credit

A supply of money now in return for the promise of paying it back later. There are many forms of credit, like loads and credit cards. Interest is charged for the money borrowed, unless if you brought the good/service with the credit card before the due date.

Budgeting

Process of creating a plan to spend your money.

Economy

A large set of inter-related production, consumption and exchange activities that aid in determining how scarce resources are allocated in a country or for a period of time.

Microeconomics

The study of decisions made by individuals and businesses.

Macroeconomics

The study of decisions being made by countries and governments.

Good

A tangible item that can be purchased.

Service

A task that is performed for the consumer —- they are usually considered as intangible.

Needs

Something that is essential for your survival.

Want

Something that people wish for and are not essential for survival.

Simplified definition of the Fundamental Economic Problem

Demands > Supply

Needs and wants > Scarce resources

Consumerism

An economic or social system that encourages consumers to purchase goods/services.

Opportunity Cost

The cost of the alternative that is given up in the consumption/production process.

Monetary

Relating to money.

Non-monetary

Non related to money.

Cost-benefit analysis

A systematic approach that is used to estimate the strengths and weaknesses of alternatives used to make a decision with the highest benefit to the individual.

Factors that influence demand

Consumers

Producers

Demand

Willingness to buy a product/service

Supply

Willingness to produce or supply a good/service.

Law of demand

When the price increases, the demand decreases and vice versa.

Economic resources that influence the ability to supply

Nature/Land

Labour

Capital

Management/Entrepreneurship

Law of supply

When the price increases, the supply increases and vice versa.

Equilibrium

When the quantities of demand and supply balance each other.

Entrepreneurs

A person who is willing to start a business and make risks in hope of gaining profit.

Characteristics of entrepreneurs

Highly motivated

Critical and creative thinkers

Financially and digitally literate

Risk takers

Confident decision-makers

Strong communicators, planners and leaders

Innovation

A new method/idea/product

What do entrepreneurs do to the economy?

Entrepreneurs increase the success of a business, gaining more profit. With more profit, the government collects more tax from them, boosting the economy. Meanwhile, the business grows, opening more space for more employees. The employees also contribute to the economy after paying more tax to the government by the business.

Subsidy

The financial support provided by the government or society to help a business run.

Stakeholders

Individuals/groups that have one or more vested interests in a business’ activities/performance.

Stakes

(Vested) interests

Competitive advantage

Something that makes a business stand out from their competition, making consumers want to buy goods/services from the business’ goods over those of their competitors.

How can competitive advantage be created?

Innovation

Increased productivity

Investing money in research, development, advertising and market

Fulfilling the demands of the consumers

Offering affordable quality goods/services

Purpose of competitive advantage

Profit

A sense of fulfilment to one’s values

Source of employment

Fulfils society’s needs, directly and indirectly

Automation

The use of technology in manufacturing/other process/facility

SWOT analysis

A tool that is used to measure a business/project’s performance.

Strengths

Weaknesses

Opportunities

Threats

Routine Transaction jobs

Clerical jobs (repetitive)

Production jobs

Assembly line work (factory jobs)

Jobs that are more exposed to automation

Routine cognitive and manual jobs

Globalisation

The increasing interconnectedness of people, states and countries though worldwide exchange of money, ideas and culture.

Positive impacts of technology in work

Easier and cheaper for entrepreneurs to start their journey

More flexibility for jobs

Wider markets of consumers and global pools for companies

Global pools

A source of trained people from which workers can be hired.

Negative effects of technology in work

Unemployment

Inequality

Insecurity