Economic Basics Flashcards
What is economics?
The study of human action and how they should make choices
What choices can economics help with? (4)
- education
- raising children
- career path
- investing in the stock market
What is scarcity?
The tension between infinite wants and finite resources
When does scarcity exist?
When there is not enough of something to satisfy everyone’s wants at a zero price
What is a free good?
A good that is not scarce and can satisfy everyone’s wants (e.g air)
How does money affect scarcity?
Charging money decides who gets the limited products on offer
What is relative scarcity?
The way that choices must be made so that scarce resources are allocated
What is an opportunity cost?
The idea that you always have to give up something to do another thing
(Cost and benefit)
What are economic resources?
Things used to produce goods and services
What are the four economic resources?
- land
- labour
- capital
- entrepreneurial ability
What is included in the ‘land’ resource, and what are examples? (2)
- any natural resources
- trees/plants
- livestock
What is in the ‘labour’ resource and what are examples? (1)
- any human service (physical or intellectual)
- jobs
What is in the ‘capital’ resource and what are examples? (2)
- machinery and equipment
- factory machinery
- factory itself
What is an example of the ‘entrepreneurial ability’ resource?
Small businesses
What is consumer sovereignty?
The idea that consumers hold the power to influence production decisions, based on what goods and services they purchase
What are the limitations to consumer sovereignty? (2)
- deceitful marketing practices
- lack of information
What is a producer?
Someone who creates and supplies goods and services
What two economic resources do producers combine?
Labour and capital
What work sectors are producers part of? (3)
- primary (natural)
- secondary (manufacturing)
- tertiary (services)
What are the six basic roles of the government in an economy?
- maintaining legal and social framework
- maintaining competition
- providing public goods and services
- redistributing income
- correcting for externalities
- stabilising the economy
What type of government does Australia have?
Constitutional democracy
What is an employee?
A person employed for wages or salary, especially at a non executive level
What is an employer?
A person or organisation that employs people
What are the two aspects of trade?
Imports and exports
What is trade between countries based on? (4)
- demand
- political stability
- interest rates
- exchange rates
What is a net export?
The annual difference between a country’s exports and imports
What is a trade surplus?
When exports are greater than imports
What is a trade deficit?
When imports are greater than exports
- not necessarily bad
What is protectionism?
Placing high tariffs on imports and limiting the number of foreign goods to protect local businesses
What does the World Trade Organisation do?
Deals with global rules of trade between nations
What is a Balance of Payments and what are the two aspects?
- records by a country
- Current account
- Financial aid
What is a Current Account (balance of payments)?
Records the sale and purchase of goods and services, investment income abroad, and other transfers like donations and foreign aid
What is Financial Aid? (Balance of payments)
Records the purchase and sale of financial assets like stocks and bonds
What is macroeconomics?
The study of production, employment, price and policies on a nationwide scale
In macroeconomics, what are the three economic goals?
- keep the economy growing over time
- limit unemployment
- keep prices stable
What are the three measures of macroeconomic goals?
- GDP
- unemployment rate
- inflation rate
What is microeconomics?
The study of how consumers, workers and firms interact to generate outcomes in specific markets
