Introduction to economics Flashcards
Farmers terms of trade…
…
Define macroeconomics
national economic aggregates or how the economy performs
Define microeconomics
the study of economic decision making and behaviour of individual producers and consumers and their interaction in markets
T or F - Australia is one of the worlds most market based economies
true
T or F - most economic systems are market based
false - most are a mixture of market based AND centrally planned systems
Define a market-based economy
economic system in which prices are based on supply and demand - incorporates the ‘invisible hand’ concept
Define the ‘invisible hand’ concept
voluntary exchange where buyer & seller tend to be better off after exchange ie. maximising one’s self interest tends to also maximise interests of society as a whole -> minimises government intervention (central regulation)
Example of ‘invisible hand’
top vets end up with more of the resources via efficient allocation of resources
T or F - a market based economy and a Capitalist system operate with a similar principle
true - based on private property & private enterprise
Define a Centrally planned economy
economic system where gov reckons it can achieve better outcomes for people rather than leaving it to the market aka. Command Economy eg. Communism - Long lines and toilet paper…
Define opportunity cost
the allocation of a resource to a particular use which means it cannot be used in another application ie. the implicit cost of the next best alternative in a set of choices
Define utility
satisfaction ie. placing a ‘value’ on something eg. treating a dog for $1200 rather than euthanising it means the dog has a greater utility than the $1200
The 4 factors of production?
- land
- labour
- capital
- management
Define commodity
a standardised good, traded in bulk whose units are interchangeable and must lack value-adding or processing
Commodities account for about ?% of Australia’s total export earnings
60%
Agriculture represents about ?% of the export earnings
25%
What is the ‘farm problem’? (hint: declining terms of trade)
the falling income of farmers compared to the rest of society, decrease numbers of farms and great instability of income from farms
Define farmers terms of trade. formula?
ratio of index of prices received by farmers to the index of prices paid for their inputs
Terms of trade = Prices received for output / Cost of inputs
define productivity
amount of output per unit of input eg. lambs/100 ewes, kg beef/hectare
define Engel’s law
when family’s income increases, proportion of money spent on food decreases
Re. trends in Australian agriculture - the share of rural sector (farm, forestry, fishing & hunting) output of Gross Domestic Product (GDP) more than ?% in early 1950’s to % in the 2003-2004
The share of rural sector (including farm, forestry, fishing and hunting) output of Gross Domestic Product (GDP) has declined from more than 20% in the early 1950s to less than 3.0% in the 2003-4
Re. trends in Australian agriculture - By gross value of production the four most important agricultural commodity groups are?
wheat, wool, beef & veal, and dairy
Re. trends in Australian agriculture - There has been a consistent trend for prices paid by farmers (i.e. costs) to increase faster than prices received by farmers. This is also known as
the cost-price squeeze
Re. trends in Australian agriculture - T or F - Farming, although declining in relative size, has strengthening links with other sectors of the economy
true
