Economics Review Notes
Economics
Study of production, distribution, and consumption of goods and services.
Macroeconomics: Focuses on the performance of the economy as a whole, including factors like GDP, inflation, and unemployment.
Microeconomics: Focuses on the behavior of individuals, households, and businesses in making decisions about the allocation of resources.
An economic system organizes these processes.
Wants and Needs
Drive the economy; trading (usually money) fulfills these.
Needs: Basic requirements for survival (e.g., food, shelter).
Wants: Desires that enhance the quality of life but are not essential for survival (e.g., luxury goods, entertainment).
Scarcity
Limited supply of resources.
Affects economic decisions of individuals, businesses, and governments.
Reason for having an economy.
Factors of Production
Land: Natural resources (renewable like fresh water & solar, non-renewable like oil & coal).
Renewable resources: Can be replenished over time through natural processes.
Non-renewable resources: Finite and cannot be easily replaced.
Labor: Physical and mental effort to produce.
Human capital: Skills, knowledge, and experience possessed by workers.
Capital: Money to purchase resources and tools.
Physical capital: Machinery, equipment, and infrastructure used in production.
Financial capital: Funds available to invest in productive assets.
Economic Systems
Planned Economy: Government controls production and distribution.
Examples: North Korea, Cuba (historically).
Characterized by centralized decision-making and state ownership of resources.
Market Economy: Private companies own production and distribution; consumer-driven.
Examples: United States, Japan.
Relies on decentralized decision-making and private property rights.
Mixed Economy: Combination of private and government control.
Examples: Canada, Germany.
Combines elements of both planned and market economies.
Economic Spectrum
Continuum of economic systems based on government involvement.
Left-leaning: Greater government intervention in the economy.
Right-leaning: Less government intervention in the economy.
Market Economy Principles
Supply & Demand: Drives the market, influencing prices.
Law of Supply: As price increases, quantity supplied increases.
Law of Demand: As price increases, quantity demanded decreases.
Competition: Rivalry among producers.
Perfect competition: Many small firms, homogenous products.
Oligopoly: Few large firms dominate the market.
Monopoly: Single producer controls supply, raising prices.
Supply and Demand
Supply: Goods and services created.
Demand: Consumer wants and needs.
Equilibrium: Balance between supply and demand at a particular price.
Increase in Demand: Drives up price due to limited supply.
Price Increase effect: Reduces demand and increases supply.
New Equilibrium: Supply, demand, and price stabilize over time.
Competition
Rivalry among producers for consumers.
Benefits consumers through lower prices and higher quality.
Monopoly
One producer controls the entire supply, leading to higher prices.
Can lead to inefficiencies and reduced consumer welfare.
Mixed Economies
Combine private ownership and government control.
Government Regulation: Rules placed on businesses.
Environmental regulations: Protect the environment.
Labor laws: Protect workers' rights.
Driven by public good and cooperation.
Market Economies
Driven by individualism.
Emphasis on individual initiative and entrepreneurship.
Crown Corporations
Companies owned by the government to provide essential services.
Examples: Canada Post, CBC.
Economic Shifts
Shift Left: More government involvement.
Shift Right: Less government involvement.
Labour Unions
Organizations protecting workers' rights.
Collective bargaining and strikes.
Advocate for better wages, benefits, and working conditions.
Political Parties & The Economy
Differing views on government intervention.
Left-leaning parties: Generally favor more government intervention.
Right-