1A Flashcards
What is Economics?
The study of scarcity and how we use the world’s limited resources to try and satisfy unlimited human wants.
What is Relative Scarcity?
A universal problem that highlights the insufficiency of resources relative to wants. This says resources are limited while wants are unlimited (humans will never be satisfied and have to make choices).
What are examples of scarce resources for Individuals?
iPhone and New Console
What are examples of scarce resources for Buisnesses?
Expand their Business (more employees/buildings) and Pay Dividends to Shareholders
What are examples of scarce resources for Government facilities?
Education and Infrastructure
What are Needs?
Things that are essential for life in our society. They don’t change overtime, and all humans have 5 basic needs.
What are the 5 rational Human Needs?
Food, Water, Clothing, Education, and Shelter
What are Wants?
Things that are desired because they give us satisfaction. They are unlimited, vary in intensity and are individually or collectively desired (trends).
What are the 3 different types of Wants?
Recurrent, Complementary and Competitive wants
What are Recurrent wants?
Wants that are never fully satisfied and keep recurring, for example, foods.
What are Complementary wants?
Wants that naturally go together, for example, house, furniture and plants.
What are Competetive Wants?
Goods/Services that can be substituted for each other, for example, butter and margarine.
What is Opportunity Cost?
Opportunity cost refers to the loss of the next best alternative when a decision is made. This occurs due to the existence of scarcity where we have limited resources but unlimited wants.
Also known as ‘economic cost’ or ‘real cost’. E.G. Choosing zinger box over maccas - maccas is opportunity cost of zinger box
What is the Production Possibility Curve?
The PPC model shows the trade-off between producing two goods with limited resources. It highlights trade-offs, efficiency, and opportunity cost—on the curve is efficient, inside is wasteful, and outside is impossible.
What happens when a point is inside the graph curve/line?
If a point is below the PPC, it shows inefficient resource use because other points indicate that more could be produced with the available resources. It is not being utilized in its maximum capacity.
Can a point be outside of the line/curve?
No, it’s unattainable due to scarcity, however, you can shift the whole line forward through advancements.
Scenario: How could a farmer shift their PPC to the right (be more productive and resourceful.
-Buy more land
-Hire more staff
-Improve machinery
How can broader ‘Economic Events’ affect the PPC POSITIVELY?
Improvements in health, education, and labor productivity, along with technological advances, can shift the PPC to the right—indicating greater efficiency, higher output, and improved resource utilization.
How can broader ‘Economic Events’ affect the PPC NEGATIVELY?
War and famine can both negatively impact the PPC, shifting it to the left—indicating a decline in available resources and overall production capacity.
What are the 4 assumptions of the PPC graph?
- All resources in the economy are fully used with no waste and efficiently.
- There is only 2 goods being produced in the simplified economy.
- Resources and level of technology is fixed.
- There’s perfect mobility between the production of the 2 goods - all resources can be used to produce each good (trucks into cars 100%)
