1. Revision: Nature of Economics

What is Economics?

The social science that investigates the organisation of the economy, including production, consumption, and the distribution of goods and services. It further examines that implications this has on consumers, workers, business, government workers. The production and distribution of goods and services is either largely or not at all managed by the government.

Economics uses a range of theories, consisting of simplified models and assumption sof human behaviour, to explain economic outcomes.

For example: in Australia the government largely controls the economy but allows businesses to individually choose and maintain their production and consumption of goods/services, with the wealth of consumers deciding the distribution of the output.

Factors of Production (Resources):

• Land: land used to transform input

• Labour: the man power used to transform input

• Capital: the equipment used to transform input

• Enterprise: the ideas and business behind the output.

The Economic Problem refers to the assumption of human’s unlimited wants with which limited resources are not able to satisfy. The economic problem is underpinned by the concept of scarcity which requires societies to consider the best way to organise resources for effciency and fairness.

Opportunity Cost refers to the good that is forgone wehen making a decision but does not measure the cost or dollar value of the not chosen product.