Unit 1 - 1.1 Understanding the nature of economics Flashcards
Social Sciences
Studies of people in society and how they interact with each other.
Examples include sociology, political science, psychology, anthropology, history, and economics.
Microeconomics
The study of individual markets and sections of the economy rather than the economy as a whole. The different choice individuals, households and firms make and what factors influence their choices and how their decision effect price, demand and supply of goods/services in a market.
Macroeconomics
Is the study of economic behaviour and decision making in the entire economy, rather than just an individual market.
Scarcity
where available resources (land, labour, capital, entrepreneurship) are limited; they are not enough to produce everything that human being need and want.
Choice
the study of choices or selecting among alternatives, due to the scarcity of resources. Economics studies the consequences of these choices present and future.
Efficiency
a quantifiable concept, determined by the ratio of useful output to total input.
Allocative Efficiency-
Hudson to check ok
making the best possible use of scarce resources to produce the combinations of goods and services that are optimum for society, and minimising resource waste.
Equity
Hudson to check
Equity is the idea of being fair or just. Fairness has a different meaning from one person to the next. Not the same as equality which is the sameness.
Sustainability
Meeting the needs of the present generation without compromising the ability of future generations to meet their own needs.
limiting the degree to which the current generation’s economic activities create harmful environmental outcomes involving resource depletion that will negatively affect future generations
Change
the economic world is continuously changing and economists must adapt their thinking accordingly
Interdependence
Individuals, communities and nations are not self sufficient. Consumers, companies, households, workers, and governments, all economic actors, interact with each other
Intervention
Refers to government intervention, meaning that the government becomes involved with the workings of markets.
Resources
Factors of production, used by firms as inputs in the production process.
Factors of production
are the resources used to produce goods and services
Land, labour, capital and enterprise
Economics
Economics is the study of choices leading to the best possible use of scarce resources in order to best satisfy unlimited human needs and wants.
Sustainable Resource Use
Refers to the preservation of the environment over time.
Land
The physical factor of production. It consists of natural resources, including agricultural and non agricultural land as well as everything that is under and above the land, such as minerals, oil reserves, underground water, forests, rivers and lakes.
Natural resources are also called ‘gifts of nature’.
Some of which are renewable (for example, wheat) and some of which are non-
renewable (for example, iron ore).
Labour
The human factor of production. It is the physical and mental effort that people contribute to the production of goods and services.
Capital
Capital is any man-made resource that is used to produce goods/services
Physical capital - machinery, tools, factories, buildings, road systems, airports, and harbours.
Human Capital - skills, abilities, knowledge and levels of good health acquired by people.
Entrepreneurship/ Enterprise
Enterprise involves taking risks in setting up or running a firm. An entrepreneur decides on the combination of the factors of production necessary to produce goods/services with the aim of generating profit
Human Captial
The skills, abilities and knowledge acquired by people as well as the good levels of health, all of which make them more productive.
Opportunity Cost
Is the loss of the next best alternative when making a decision
Free Good
Any good that is not scarce and therefore has zero opportunity costs. Oxygen, sunlight, sea water
Economic Wellbeing
relating to the level of prosperity and quality of living standards enjoyed by members of an economy.
It includes
♣ present and future financial security
♣ the ability to meet basic needs
♣ the ability to make economic choices permitting achievement of personal satisfaction
♣ the ability to maintain adequate income levels over the long term
What are the 9 central concepts
Free market economic system
a market with no government intervention
Basic economic problem
Resource are scarce
There are finite resources available in relation to the infinite wants and needs that humans have
Needs are essential to human life e.g. shelter, food, clothing
Wants are non-essential desires e.g. better housing, a yacht etc.
Due to the problem of scarcity, choices have to be made by producers, consumers, workers and governments about the best (most efficient) use of these resources
Economics is the study of scarcity and its implications for resource allocation in society
Economic Goods
are scarce in relation to the demand for them
This makes them valuable
Due to their value, producers will attempt to supply them in order to make a profit
Anything that has a price tag on it is an economic good e.g. oil, corn, gold, trainers, watches and bicycles
