economics unit 1 aos 1 Flashcards
economics
Economics is the study of how we choose to use limited resources in ways that best help to satisfy our basic needs and unlimited wants.
microeconomics
studies the operation of the smaller fragments or units make up the whole economy, such as a particular firm, industry or market.
examines how demand and supply interact in a market to determine an equilibrium price and quantity traded.
macroeconomics
takes a wider Birds Eye look at the whole economy and the larger flows affecting overall economic conditions in the country
positive economics
refers to facts and statistics about the economy, it is descriptive and factual analysis which can be proven.
normative economics
is subjective judgements and evaluations about what the economy should do. It is based on opinions, personal values and lacks numerical evidence.
needs
basic necessities required fro ones survival and well-being
wants
desires that can be satisfied through the consumption of goods and services.
relative scarcity
relative scarcity is the basic economic problem and arises when the available resources are insufficient [limited] to fulfil humans wants and needs [unlimited]
resources
factors of production are the inputs used by businesses to produce or supply the goods or services that we need or want.
natural resources
are the productive inputs that occur in nature (e.g. soils for agriculture, mineral deposits, forests, native animals, oceans, climate, rivers, clean air and the environment).
labour resources
are the intellectual skills, knowledge and manual effort that people provide as members of the nation’s labour force (e.g. those of a doctor, mechanic, retail attendant and banker).
Capital resources
involve manufactured or producer goods. Here, capital is seen as the stock of past production that is used to aid current and future production. This includes the physical plant and machinery (that may incorporate new technology) used by a firm to help make other finished goods and services.
opportunity cost
is the value of the next best alternative gone when a decision is made.
resource allocation
resources are allocated to produce goods and services that cater to both wants and needs.
consumer preferences and market demand influence the allocation of resources.
PPF diagram
Is used to illustrate the many production combinations for a country that is able to produce just two products and where all resources are used most efficiently.
material living standards
Material living standards refer to an individual’s ability to access goods and services. They are predominantly dictated by ones income.
non-material living standards
Non-material living standards are more subjective and harder to measure as they are based on quality-of-life factors such as work-life balance, crime rates, air pollution, health and general levels of happiness.
trade-offs
are when businesses, individuals or governments make choices between different ways that scarce resources might be used.
economic systems
is a collection of institutions involved in directing and organising the production and distribution of goods, services and incomes.
planned economy
Purely planned economies rely entirely on powerful and often non-democratic, dictatorial, central governments to make key economic decisions about what, how, and for whom to produce
mixed economy
Mixed economies (also called contemporary market economies) are a hybrid. They involve combining most of the features of market economies with some of the features of planned economies. So, mixed economies typically have both a dominant private sector, as well as a less important government or public sector.
market economy
A pure market economy relies solely on the operation markets where buyers, sellers and a system of prices answer the three basic economic questions. Self-interest, competition and private ownership of resources (the private sector) are important elements in this type of economy.
traditional economy
Traditional economies today are those that exist only in pockets of other economies, mostly in remote parts of Africa, Asia and South America. Here, the three basic economic questions are answered by families and tribes guided by long-established and time-honoured customs
market failure
ineffective allocation of resources where governments must intervene
price system/ mechanism
price changes upwards and downwards acts as a signal to tell or inform producers of changing consumer decisions about particular types of goods.
three sector flow model
is a simple diagram that shows the three key economic agents or parts making up a mixed economy . It also shows the ways these sectors interact with each other through the four main flows
the consumer or household sector
all individuals of this sector are consumers or buyers of goods and services, but some are also the owners or suppliers of resources.
producer or business sector
composed of large, medium and small firms making goods and services most of these are privately owned and hence make up the private sector of the economy.
government or public sector
includes the activities and decisions of federal, state and local authorities.
this group collects various taxes and other revenue from those households earning income, and then uses these to help pay for government spending on the provision of goods and and services for the community. the economic activities of governments make up the public sector.
economic activity
relates to the production of goods and services. changes in the rate of economic activity will affect economic growth.
public sector
part of the economy involving the government production of goods and services.
private sector
includes small, medium and large businesses that are owned by individuals that produce goods and services. Most try to maximise profits.
consumer behaviour
looks at how, why, where and when consumers choose to to purchase or not purchase a good or service.
incentive
An incentive is an inducement designed to further encourage behaviour that would otherwise not occur to the same extent.
disincentive
disincentives try to discourage certain behaviour.
marginal benefits from consumption
the law of diminishing marginal utility states that each additional (or marginal) unit of a good or services that is consumed generates less utility (satisfaction) than the previous one.
business behaviour
looks at the factors influencing how firms make decisions about the production and sale of particular goods and services.
subsidy
A subsidy is money that is paid by a government or other authority in order to help an industry or business, or to pay for a public service.
indirect tax
a tax levied on goods and services rather than on income or profits.
direct taxes
a tax, such as income tax, which is levied on the income or profits of the person who pays it, rather than on goods or services.
economic stabilisation
is to make sure the economy is performing within their objectives by ensuring employment, inflation and GDP is stable by implementing policies to manipulate consumer behaviour
