Economics

What are the 3 basic economic questions?

1. What to Produce?

2. How to Produce it?

3. For whom to Produce it?

Opportunity Cost

The value of the next best alternative use of resources.

Natural Resources

Use of all natural resources.

Labour Resources

Skills, talents, & experiences people can offer.

Capital Resources

Money or property used in the making of goods & services.

Entrepreneurs

A person who is willing to seize opportunities to start and operate a business, and is prepared to take risks in the hope of making a profit.

What is an Economy?

Economies exist in a geographical area (e.g a local area, country, or the world). An economy is the state of these places in terms of the production and consumption of goods and services and the supply of money.

What kind of Economy is Australia?

The Australian economy is a mixed market-based economy.

Australia as a Mixed Market-Based Economy

Australia’s economy works because different groups depend on each other. Businesses (producers) make goods & services, and consumers buy them. Consumers earn money by working for these businesses.

Consumers

Someone who purchases any good or service in the economy. The strength of the economy is dependent on their spending.

Producers

The firms or companies that create things people want or need. They use resources like labour, natural, and capital resources to make products.

The 5 Sector Circular Flow Model

It explains how households, businesses, the governments, banks, and overseas countries are all linked.

Financial Sector

It consists of banks and financial institutions. If people are saving money with these institutions, the economy stagnates because they are not spending. They also try to encourage investment.

Government Sector

It has a significant control over the economy. Its money is generated by taxation of the consumers & producers. With its taxation money, it decides where to focus government spending.

Overseas Sector

The goods/services we have a surplus of, we export to other countries. The goods/services we have a shortage of, we import from other countries.

Injections

Putting money into the economy. Money is being used elsewhere in the economy, (investment, government spending, exports).

Leakages

Taking money out of the economy. The money is not being used elsewhere in the economy, (savings, taxes, imports).

Import

An import is the purchase of a good that was manufactured in another country.

Export

Exports refer to the sale of a domestically manufactured good in a foreign market.

Difference between and Import & an Export

An import is when we buy resources/goods & services from other countries. An export is when we sell our goods & services to other countries.

What is Trade?

Trade is the buying and selling of goods and services we want and need.

Globalisation

The process of the world’s countries becoming more connected as a result of international trade and cultural exchange.

Commodity

A commodity is a basic good or raw material that can be easily exchanged for another of the same kind.

Reasons why Australia Manufacturing moved to Asia

• Trade agreements make is easier to do business with asian countries

• Australia's economy is now more focused on services and mining than manufacturing

• Labor (wages) is cheaper in many Asian countries so companies moved manufacturing there to reduce production costs

• Many Asian countries have advanced manufacturing technology

• Lower operating costs – expenses like factory space, materials, and energy are cheaper in Asia, making manufacturing more profitable

Law of Demand

When the cost of something rises, people don’t want to buy it. When it lowers, more people want to buy it.

Superannuation

Money that your employer puts away every pay, to help you live a comfortable life once you retire.

Tariffs

A tariff is a tax or duty imposed by a government on imported (or sometimes exported) goods

Political Tensions

The, strain, conflict, or instability between political entities—nations, regions, or factions—that negatively impacts economic activity

Scarcity

The fundamental economic problem where limited resources (land, labour, capital, and entrepreneurship) are insufficient to satisfy unlimited human wants and needs

Forecasting

The process of using historical data, econometric models, and key indicators to predict future economic conditions