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Economics 1,2 > Unit 1, AOS 1 > Flashcards

Unit 1, AOS 1 Flashcards

1
Q

What is economics

A

= study of human behaviour - it’s re looking @ the way individuals, families, businesses + gov.ts make decisions / choices re how 2 use their limited resources in ways that best help 2 satisfy their basic needs and unlimited wants

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2
Q

What is microeconomics

A

= study of behaviour of individual c’ers as well as bus

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3
Q

What is macroeconomics

A

= involves analysis of economy-wide phenomena

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4
Q

What is the/an economy

A

= a place where scarce resources are allocated among competing uses and g/s are brought +sold

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5
Q

What is a consumer

A

= a person who purchases g/s

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6
Q

What is a producer

A

= person who provides g/s 2 c’er 4 payment

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7
Q

What is positive economics

A

= fact based economic statements or claims that can be verified or tested to be true/false

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8
Q

What is normative economics

A

= opinion of value judgement statements or claims that are subjective in nature and thus can’t be verified/tested to be true/false

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9
Q

What is the difference b/n normative and positive economics and why is it important to know

A

-> p.o.d = if it is fact based

important b/c-
- help inform decision making -> decisions based on fact
- help us determine how 2 use scarce resources 2 best meet our needs and wants

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10
Q

What are the 3 main components of economic activity

A

= production, income, expenditure

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11
Q

What is relative scarcity

A

= the imbalance between our unlimited needs and wants compared to our limited resources

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12
Q

What are needs

A

= basic g/s that are necessary 4 our survival

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13
Q

What are wants

A

= something we desire 2 have 2 improve our satisfaction or quality of life h/r x necessary 4 survival

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14
Q

What are resources

A

= inputs by bus 2 produce or supply g/s that we need or want

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15
Q

What are the types of resources

A
  • Natural = productive inputs that occur from nature
  • Labour = intellectual skills, knowledge + manual effort that people provide as members of nation’s labour force
  • Capital = involved manufactured or produced goods
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16
Q

Who are the main decision makers in an economy, what do they decide and what are their aims

A
  • C’ers = decide what types of g/s 2 consume -> aim 2 maximise own s.o.l
  • P’cers = decide what 2 produce + materials, equipment + labour needed 2 produce 2 best satisfy c’er
    -> aim 2 maximise profits
  • Gov.t = decide how + how much tax p’cers + income earners + home /+ how 2 spend public funds -> aim 2 maximise s.o.l for all Aus’s
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17
Q

What is opportunity cost

A

the value of the next best alternative foregone whenever a decision is made

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18
Q

What is the production possibility frontier/curve

A

a graphical representation of choices available 2 society about how resources may be used

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19
Q

What is productive capacity

A

the point @ which production (gdp) is occurring @ max level possible in an economy

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20
Q

What are the important assumptions of the ppf

A

1) only 2 goods are produced in an economy
2) all resources or factors of production are fully and efficiently employed

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21
Q

How to increase productive capacity

A

the availability and efficiency (productivity) of resources

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22
Q

What is productivity

A

the level of output produced from a given number of inputs

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23
Q

What are the 2 types of efficiency

A
  • productive efficiency = maximising output from any given level of input
  • allocative efficiency = most efficient allocation of resources occurs when living standards and welfare are maximised + not possible 2 further increase S.O.L by changing the way resources are allocated
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24
Q

What are the 3 basic economic questions

A

1) What and how much to produce
2) How to produce
3) For whom to produce for

-> needed b/c relative scarcity

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25
What is planned socialism
-> gov.t / central authority controls the economy t/f decides - what 2 produce + how much - how 2 produce via determining production methods - distribution of g/s
26
Key beliefs of market capitalism
- Private enterprise - Free enterprise - Self interest - Competition - Consumer sovereignty
27
What is capitalism
- market determines what and how much to produce - how to produce determined by market - c'er = for whom to produce Aus also has minimal gov.t intervention
28
What is a market failure
= under-production of essential g/s = over-production of undesirable g/s
29
What is economic activity
= refers 2 the volume of production, income and expenditure
30
What is the role of households
- They provide their time and skills (labour) in exchange 4 income - c'er purchase g/s - pay tax 2 gov.t - may borrow from or save with financial sector
31
What is the role of businesses
- produce output which is sold 2 c'er 4 a price 2 receive revenue from H sector - they pay taxes to the gov.t - may borrow from or save with financial sector
32
What is the role of governments
- They receive taxation revenue from h + b sectors - spend money on pub. g/s i.e roads
33
What are the 4 flows of the 3 sector- four flow model of the economy
1) Resources provided 2 bus sector 2) income returned 2 H. sector 4 provision of resources 3) expenditure on g/s (H + gov.t expenditure) 4) production of g/s ( real gdp)
34
What are material living standards
= access 2 g/s
35
What are non material living standards
- relate 2 influences which generally money can't buy
36
What are trade offs
= forgoing the opportunity to gain something of value with our time or money once we use our time or spend money on some other activity / g/s
37
What are the differences between trade offs and opportunity costs
- T.O = range of dif. benefits we could have gained h/r O.C = next best alternative - O.C is forgone h/r T.O = flow on affect of what we've missed out on - 1 T.O will be O.C h/r many aren't clear @ time - T.O = more indirect, O.C = more direct
38
Examples of microeconomic trade offs
-Spending vs saving - Work vs leisure -Producing 1 product over other ones
39
Examples of macro economic trade offs
- Economic growth vs environment - Efficiency vs equity
40
What are short run trade offs
= period of time close enough to heavily influence decision making (0-12 months)
41
What are long run trade offs
= period of time far enough to have a smaller influence on todays decision making (12 months - infinity)
42
What is a cost benefit analysis
= comparison of the expected costs + benefits of a particular course of action / project
43
What + who are economic agents
= individuals + orgs that participate in the economy + make economic decisions -> c'ers, p'ers, gov.t
44
What is the private sector
-> relates 2 private ownership / control of resources + economic decisions made by owner of resources
45
What is the public sector
-> relates 2 gov.t ownership / control of resources + economic decisions made by gov.t + its agencies - 3 levels = Fed, state + local
46
What are the 3 traditional view points of consumers
1) c'er have an ordered set of preferences 2) Consumers make informed decisions 3) Consumers act rationally (2 max utility)
47
What is utility
= the satisfaction or benefit gained from consuming a g/s
48
What is marginal utility
= extra satisfaction that c'ers gain from consuming additional units / g/s
49
What is diminishing marginal utility
= occurs when the more of a g/s consumed in a period of time, the smaller the total utility that is gained from the last unit
50
What is total utility
= total satisfaction c'ers gain from consuming g/s
51
What is the law of diminishing utility
-> each additional unit of a g/s that is consumed generates decrease utility than the previous one t/f growth in total utility slows after each consumption
52
What is utility maximisation
-> c'ers seek 2 increase utility by consuming different combinations of g/s
53
What are budget constraints
= the amount of income available 2 c'ers 2 spend. This affects c'er ability 2 purchase g/s as income available 2 spend is limited
54
What is an incentive
= described as a benefit, reward or cost that motivates economic agents 2 make specific decisions or act in a particular way
55
What are disincentives
= punishments used 2 discourage economic agents from completing certain behaviour.
56
What is the traditional economic viewpoint of businesses
- Meet c'er demand - Max sales revenue - Min production cost -> businesses seek profit maximisation in both short and long term
57
What is consumer sovereignty
= where c'ers primarily determine what will be produced via their purchasing decision
58
What is comparative advantage
= a country should specialise in producing those g/s where its opportunity costs are relatively lower than that of other countries -> max lvls of output of g/s from economy's resources (efficiency) -> surplus can be exported and income earned can be used 2 import g/s (profitability)
58
What is comparative advantage
= a country should specialise in producing those g/s where its opportunity costs are relatively lower than that of other countries -> max lvls of output of g/s from economy's resources (efficiency) -> surplus can be exported and income earned can be used 2 import g/s (profitability)
59
What is comparative advantage
= a country should specialise in producing those g/s where its opportunity costs are relatively lower than that of other countries -> max lvls of output of g/s from economy's resources (efficiency) -> surplus can be exported and income earned can be used 2 import g/s (profitability)
60
What is an incentive to businesses by gov.ts
- Production subsidies -> dec. cost of production 2 incentives production of specific g/s e.g solar panels - Lowering tarrifs -> promoting structural change 2 economy performance through dec. price of imported goods
61
What is a disincentive to businesses by gov.ts
- Tax e.g emissions trading scheme
61
What is a disincentive to businesses by gov.ts
- Tax e.g emissions trading scheme
62
What are the 3 goals of governments in pursuit of economic stability. (budgetary policy)
-> low inflation -> strong and sustainable economic growth -> full employment
63
What is the goal of low inflation
= gov.t aims 2 have gen lvl of prices inc @ rate of 2-3% over medium term
64
Problems with high and low inflations
over 3% - - c'er save rather than spend - bus lay off workers b/c prod costs - slow production under 2% - c'er delay purchases b/c decrease pressure - bus see slow price rise t/f less potential 4 increase profits + x inc production
65
What is the goal of strong and sustainable growth
= gov.t aims 2 inc the total real value of production by the highest rate possible without causing any unnecessary environmental, external or inflationary pressures, measured @3-3.5 % Real gdp growth per annum
66
Problems with slow or high growth rates
Slow rates - - -> bus slow production + lay off labour - dec. M.L.S High rates - - -> inflation if producing @ capacity - -> environmental damage
67
What is the goal of full employment
= gov.t aims 4 the lowest interest rate of unemployment possible without causing inflation 2 accelerate, usually around 4.5% unemployment rate
68
Issues with low or high unemployment rates
Low - -> shortages +inflation b/c increase average income High - -> decrease in production due 2 lower demand - put inc pressure on gov.t finances
69
What is expansionary budgetary policy
= used when economy is underperforming + gov.t wants 2 speed up economic activity where gov.t outlays are greater than their revenues
70
What are possible expansionary changes to budgetary policy
- infrastructure projects - lower tax rates - greater transfer payments
71
What is contractionary budgetary policy
= used when economy is overperforming + gov.t wants economic slow down, where revenues are greater than their outlays
72
What are possible contractionary changes to budgetary policy
- increase tax rates - lower transfer payments or make welfare access inc difficult

Economics 1,2 (7 decks)

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