Economic Notes

Economics – The science that analyses the decisions made by individuals, businesses and government about how limited supplies are used to satisfy society’s unlimited needs and wants Scarcity Needs – Things that people need for survival. E.g., food, water. Wants – wishes or desires that make life enjoyable but is not needed for survival. E.g., PS5, Lollies. Scarcity – The basic economic problem. People have unlimited needs and wants but only limited resources to satisfy them. Economic problem – when there is limited supplies but unlimited wants. Making decisions. Resources – items that we use to produce goods and services to satisfy needs and wants. Include land, labour, capital and enterprise. Land – Resources found in nature. E.g., rainfall, forests, seas, mineral deposits. Labour – Includes all the people who are employed by a business. E.g., Doctors, Miners, Builders, hairdressers, nurses. Capital – These are made by combing land and labour. E.g., electricity, grid system, tractors, roads. Enterprise – Individuals who organise and combine the other three resources to create value. E.g. restaurant owner, fashion designer. Businesses use the 4 resources of land, labour, capital and enterprise to produce goods and services that consumers want and need. Opportunity cost – This is the alternative given up when making a choice. E.g., Hakeem card for RPA. Resource allocation – Making decisions about how producers will use resources. Economic system – a way of production and distribution of the nation’s goods, services and incomes. Market–a market is where consumers negotiate for goods and services. Not always a physical place. Eg. eBay, Fremantle Market. Specialisation – A method of production where a individual, business or government focus on a specific range on goods or services, in order to increase production and make the most efficient use of resources. E.g., high school teachers. Interdependence – Reliance between consumers, workers, businesses and governments in an Economy. Import – Buy from overseas. Export – Sell overseas. 3 Economic Questions – What to produce, How to produce, For whom to produce. The main objective of an economy is to satisfy the needs and wants of citizens. It does this by efficiently producing as many goods and services as possible by addressing the 3 key basic economic questions. In Australia the government is responsible for managing the economic performance. Three goals of economic performance are pursued in this regard. Low inflation – a period of time when prices are rising slowly. Economic growth – this is the amount of goods and services produced per head by the population over a period of time. Economic indicators of economic performance. Full employment – the condition in which all who are able and willing are employed. Inflation Rate – This measures the change in the prices of goods and services. E.g., bread, petrol. Unemployment rate – How many workers are without a job. High rate reflects unhealthy economy. Gross domestic product (GPD) – It measures economic growth. E.g., If the GPD is 50 billion in 2020 and 60 billion in 2021 it could indicate that the economy is progressing well. Why Governments monitor economic performance.

• Information gained from these economic indicators influences government decision making.

• Australia’s government tries hard to improve economic growth. With information, the government can take remedial actions to ensure growth.

• Economic growth is believed to improve the citizens standard of living. Standard of living – shows how well-off individuals or countries are overall. Consumers, Producers and Entrepreneurs To buy goods and services, consumers need an income. Income – the money earned through employment (such as salary, wages or commissions) or investment (such as rent, bank interests, and dividends) Producer – an individual or business involved in the production of goods and services. Consumer – a person or group who is the final user of goods and services produces within an economy. An economy consists of consumers and producers, who make and sell goods and services. Producers pay their employees with money (salary, wages, or commissions) and also hope to make money themselves, for what they sell. Needs and Wants Needs – goods and services that people must have in order to survive. Wants – are wishes or desires for something that makes life enjoyable, but is not necessary for survival. Needs – Must be satisfied If life to be continued. Remain required throughout life. Temporarily wane when satified. Wants – Life can continue without them. Wants change throughout life. New wants arise when others are satisfied. Goods and services Goods – Physical and tangible items or things that satisfy our needs and wants. E.g., air pods, bread. Services – actions performed for you by others in order to help satisfy your needs and wants: e.g. doctors, tutors, plumbers. Relationship between businesses and consumers Businesses - producers that make or supply goods and services that are distributed to household. E.g., Doctor provides medical consultations for his patients (service). Kmart sells many types of goods to customers. Householders/consumers use money, (credit, debit) cards or bank cheques to purchase goods and services. Businesses pay the employees money in the form of wages, salary or commissions for their labour. Labour is exchanged for money. What consumers want Producers who want to be successful in businesses must supply goods and services that consumers want and need. If producers fail to do this, they could have goods and services that no one wants to buy (e.g., outdated fashion) leading to poor business. Also, to be successful producers must have the ability to understand and act on consumer preferences. The Marketplace A market is any organised exchange of goods and services. May not always be a physical place but can be online. E.g., Fremantle market, eBay. Functions of a market

• Consumers can find the availability of goods and services.

• Consumers can pay for and receive their goods and services,

• Provides choices that cater for particular consumers needs and wants. E.g. variety of hairdressers. Responding to consumer demand Ways a business owner finds out what consumers want:

• Analyse the business sales – monitor the sale of goods. The popular and unpopular goods and take action.

• Carry out market research – this includes doing consumer surveys to find out consumer preferences.

• Examine social trends – identify issues that people are concerned about and responding to them. E.g. provide organically produced products that are environmentally healthy and promotes a healthy lifestyle. Healthy lifestyle – most consumers are concerned about their overall well-being. They:

• Look at food packaging for information for health reasons

• Compare different products available Well-being – refers to an overall measure of quality of life.