Year 10 HASS - Economics Revision (Full)

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58 Terms

1
Want

Unnecessary for survival

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2
Need

Necessary for survival

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3
Economic Problem

unlimited wants, limited resources aka scarcity

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4
Opportunity Cost

the best alternative forgone when a choice is made.

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5

Land Resources

All resources supplied from the earth (e.g. water, oil, sunlight)

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6

Labour Resources

All resources supplied by humans (e.g. labour, intellect)

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7
Capital Resources

All resources that assist the production of goods + services (e.g. drills, tractors, computers)

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8
Enterprise

Coordination and management of other resources. Ability to combine land, labour and capital to make profit or products.

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9
Microeconomics
Understanding how consumers and producers make decisions. includes theory of Supply and Demand
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10
Macroeconomics

The study of economic performance as a whole, including inflation, employment, total production and economic growth

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11
Relative Scarcity

Resources are scarce compared to society’s unlimited needs and wants.

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12
Trade Off
When something is given up for something else
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13
The three economic questions

What to produce? How to produce? For whom to produce?

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14
Business Cycle

Fluctuations in the economy in terms of output and growth measured by changes in Real GDP every quarter.

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15

What fluctuates in the business cycle?

  • GDP, Inflation, Prices

  • Consumer Spending, Investment

  • Income

  • Supply and Demand

  • Employment

  • Profit

  • Consumer Confidence

  • Economic Growth

  • Production

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16

What happens during a peak?

Peaks see unsustainable growth and demand exceeding supply.

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17

What happens during a recession?

Recessions see income cuts.

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18

What happens during a trough?

Fiscal and monetary intervention required to make GDP grow again.

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19
PPF (Production Possibilities Frontier)

Shows all production possibilities, where each point on the frontier is a way resources can be allocated to producing two different products.

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20
What does the term 'frontier' refer to in economics?
The frontier refers to the maximum possible production of goods with the given resources.
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21
What does it mean if production is below the frontier?
It indicates underemployment of resources.
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22
What does it mean if production is above the frontier?
It is impossible to achieve with the current resources.
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23

Law of Increasing Opportunity Cost

Every additional unit of production of one good requires sacrificing an increasing amount of production of another good

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24
Circular flow of income
Demonstrates the flow of income through an economy.
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25
Leakages
When money exits the economy. This includes consumer savings to financial institutions, taxes to the government, and money given for imports from overseas.
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26
Injections
When money enters the economy. This includes investments from financial institutions, governments spending from the government, and money received from exports sent overseas.
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27
Factor Market

Households give factors of production for income from firms (DR WISP - demand, rent, wages, interest, and profit).

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28
Product Market

Households give money to purchase goods and services from firms.

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29
GDP

Market value of all finished goods and services produced within a country within a year; Only counts products produced that year that won’t be sold again as part of another product.

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30
Nominal GDP
Increases with inflation.
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31
Real GDP

A measure of GDP that controls for inflation by measuring different years with the same prices, eg 1950-2015 w/ 2009 prices.

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32

Real GDP / capita

Real GDP / Population

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33
Standard of Living
Higher Real GDP per capita = better standard of living.
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34
Importance of GDP

GDP indicates the health, size, growth or decline of an economy, as well as helping understand living standards.

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35

Supply

The amount of a product that a producer is willing/able to sell at a given market price.

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36

Demand

The amount of a product that a consumer is willing/able to buy at a given market price.

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37
Law of Supply

Increasing price → Increasing supply

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38
Law of Demand

Increasing price → Decreasing demand

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39
Equilibrium

QD = QS

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40
Excess / Surplus

QD < QS

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41
Shortage

QD > QS

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42
Economics
The field of study of how people allocate their scarce resources to best satisfy their unlimited needs and wants
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43
Opportunity cost
the best alternative given up by making a decision
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44
What can move the PPF?

1. Change in productive resources
2. Technological advancements

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45

What is the formula for GDP?

Consumption + Investment + Government Purchases + Net Exports
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46

Demand shifters

Income, Population, Tastes, Price of Related Goods, Expectations, Expected Future Price

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47

Supply shifters

Technological Innovation, Input Prices, Taxes and Subsidies, Expectations, Entry / Exit of Producers, Changes in Opportunity Costs

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48

Consumer Surplus

What consumers would pay - market price, reflecting consumer benefit

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49

Normal Goods & Inferior Goods

Normal goods: ↑ income → ↑ demand

Inferior goods: ↑ income → ↓ demand

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50

Substitute Products

↑ price → ↑ demand for other good

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51

Complement Products

↑ price → ↓ demand for other good

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52

Movements & Shifts

Movements caused by price, shifts not caused by price

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53

Types of Economic Systems

Traditional, Command, Market, Mixed

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54

Traditional Economy

  • People follow customs and make what their ancestors made

  • People make goods the same way their ancestors did

  • People make things for the community

  • Examples include Inuit, Australian Aboriginals and Amazon Rainforest communities.

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55

Command Economy

  • Governments make all economic decisions such as distribution of resources and regulation of prices and wages

  • Governments decide how/how much to produce

  • Governments decide who gets what

  • Examples include communist countries (North Korea, Cuba, Vietnam)

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56

Market Economy

  • Businesses decide what to make for profit

  • Businesses decide how/how much to produce

  • Production for consumers

  • Pure market economies don’t exist

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57

Mixed Economy

  • Businesses decide what to produce

  • Businesses decide how much, but government regulates some industries

  • Production for consumers

  • Examples include USA, Canada, England, Japan and others

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58

How do you draw the 5-sector circular flow of income model?

Households, firms, government, financial intermediaries, overseas. Leakages on the left, injections on the right.

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