Economics 1 Flashcards
What is economics?
It is the social science that’s studies the choices that individuals, businesses, governments, and other stakeholders in society make as they cope with scarcity.
Why are choices important enough to study?
They are necessary because each of us faces the economic facts of life known as scarcity. Everyone has needs and wants, but the world does not have enough resources to full all these needs and wants. So scarcity takes place. And the study of it is critical to maximize these scarce resources.
What’s the difference between needs and wants?
Wants: These are the human desires for goods and services. Our wants are unlimited.
Needs: These are things we cannot survive without, such as food, water, shelter, and clothing. These are considered to be necessities.
What 2 parts can economics be divided into?
Microeconomics: is the study of choices that individuals and businesses make, the way these choices interact in markets, and the influence of government in those choices.
Macroeconomics: is the study of the effects in the national economy and the global economy of the choices that individuals, businesses, and governments make.
What 3 types of resources are there?
- Natural Resources
- Human Resources
- Man-made Resources
What is the factors of production?
They are the resources that are the building blocks of the economy. The include what people use to produce goods and services.
What are the 4 factors if production? And explain them.
- Land: Land and anything that comes from it. Examples are water, oil, copper, natural gas, coal, and Forrests. They can be renewable and non-renewable.
- Labour: The labour in order to produce goods and services. Examples are, the work done by the waiter who brings you your food, the engineer who designed the bus, an artist’s creation of a painting.
- Capital: Such as machinery, tools, buildings humans use to produce goods and services. Examples are, hammers, forklifts, conveyer belts, computers, and delivery vans.
- Entrepreneurship: A person who combines the other factors of production - land, labour, and Capital - to earn a profit.
What is a problem all individuals and societies are confronted by?
The problem is we have unlimited wants and needs, with limited goods and services to full those needs, which forces us to make choices. Many will be left unsatisfied due to us living in a word of scarcity.
What is opportunity cost?
Is what we call the trade-off between 2 goods. It’s the measuring the cost of the chosen alternative in comparison of the alternatives that we have to sacrifice.
What is the purpose of the production possibilities curve?
The PPF indicates the combinations of any 2 goods or services that are attainable when the community’s resources are fully and efficiently employed.
The PPF is a very useful way if illustrating scarcity, choice, and opportunity cost.
What does the bulging shape of the curve illustrate in a PPF?
It illustrates the increasing opportunity costs: as we move along the curve, mkre if the one good has to be sacrificed to obtain an extra unit of the other good.
What does the PPF mean when reach in macroeconomics?
It illustrates the point at which a countries economy is most efficiently producing it’s various goods and services, and therefore, allocating it’s resources in the best way possible.
What do economists use a PPF for?
They use it to demonstrate that an efficient nation produces what it is most capable of producing and trades with other nations for the rest.
What does a shifting outwards PPF mean?
When the quantity of available resources may increase, or production techniques may improve over time. This indicates economic growth.
What’s the difference between goods and services?
- Goods: are real or concrete items such as property, cars, furniture and clothing.
- Services: are abstract items like medical services, legal services, financial services, the services of an economic lecturer, and the services provided by public servants.
What 2 groups can goods be broken into?
- Consumer goods: goods that are used or consumed by individuals or households to satisfy wants. Examples are food, wine, clothing, shoes.
- Capital goods: Are goods that are not consumed in this way but are used in the production of other goods. They permit for more production and satisfaction in the future. Examples are machinery, plant, and equipment.
What are the different categories of consumer goods?
- Non-durable: Goods that are only used once. Eg, food, wine, tobacco.
- Semi-durable goods: Can be used more than once but last for a limited time period. Eg, clothing, shoes, bedding, and motor car tires.
- Durable goods: normally last for a number of years. Furniture, washing machines, dishwashers, and cars.
What 2 categories can good be grouped interms of stage of production?
- Final goods: the goods used or consumed by individuals, households, and firms. A load of bread consumed by a household, for example, is a final good.
- Intermediate goods: are goods purchased to be used as inputs in producing other goods. Intermediate goods are thus processed further before they are sold to end-users. Eg, flour used by a baker.
Describe the mind map behind the categories of goods.
1. By Use or Purpose
Consumer Goods:
- Non-durable Goods
- Semi-durable Goods
- Durable Goods
Capital Goods
2. By Stage of Production
- Final Goods
- Intermediate Goods
3. By Ownership and Accessibility
- Private Goods
- Public Goods
4. By Economic Value
- Economic Goods
- Free Goods
5. By Characteristics
- Homogeneous Goods
- Heterogeneous Goods
Describe the 2 categories that goods can be devided into in terms of ownership.
- Private goods: a good that must be in competition, must be purchased to be consumed, and consumption by one individual prevents another individual from consuming it.
- Public goods: are open to everyone’s use and consumption by one party does not deter another party’s ability to use it. Mostly at no cost like drinking taps.
Describe the 3 categories of goods in terms of economic value.
- Economic good: a good that is produced at a cost from scarce resources. Most goods are economic goods.
- Free goods: a good that is not scarce and therefore has no price. Air sunshine, and seawater.
What 3 characteristics do goods have and can be broken into?
- Homogeneous Goods: are produce that has essentially the same physical characteristics and quality as similar products from other suppliers. Therefore one product can easily be substituted for the other.
- Heterogeneous Goods: a product that I’d readily distinguishable from competing products and cannot be easily substituted for another. The buyer has to determine which features are the most important. Eg, aspects like advertising, brand name, colour, size, and shape influences ones decision.
Why is it important to study and know the factors of production?
- Resource Allocation - Ensures efficient use of resources.
- Economic Planning - Helps in policy and strategy development.
- Cost Analysis - Optimizes costs for better profits.
- Productivity Improvements - Enhances efficiency and innovation.
- Investment Decisions - Guides where to invest resources.
- Economic Growth - Identifies growth opportunities and bottlenecks.
- Risk Management - Prepares for potential production risks.
Understanding factors of production helps optimize resources, improve efficiency, and support economic and business decisions.
Why is it important to know the different categories of goods in an economy?
- It helps with identiyfing the best ways to allocate scares resources effectively.
- Categories of goods can influence consumer buying patterns. Knowing this helps businesses and governments predict demand and tailor their offerings or policies accordingly.
- Market dynamics. Goods behave differently in markets due to elasticity, sustainability, and production characteristics. Studing these differences helps in understanding pricing strategies, competition, and market equilibrium.
