UNIT 1 AOS 1 Flashcards
Economic agent
Economic agents are participates in any given economy which includes businesses, households and governments
Incentive
An incentive encourages or discourages economic agents to make particular choices
Consumer positive incentive
Promote buying using and endorsing behaviours that support positive impacts (externalities)
Consumer negative incentive
Discourages behaviours that results in undesirable outcomes (negative externalizes)
Producer positive incentives
Promote greater production and behaviour that improve living standards
producer negative incentives
discourages production of demerit goods
Public Sector
- **Essential community services **
- Provided by the Governments
- Wages paid by the government (for diff)
- eg, postal service, public schools, healthcare, roads
Private Sector
- profit originated businesses run by individuals/groups to make a profit
- Wages are paid by those companies
- eg, CBA, milk bar, consulting firm, private schools
Factors of production
the 4 factors of production and their defs
Land
Any natural resource provided by nature and used in the process of production. e.g., mining land
Labour
The mental and physical capacity of workers to produce goods and services.
Capital
human-made goods - not directly consumed by humans, used for produce other goods and services that can be consumed.
Ebtreorebership
Combines all other factors of production to create a good or service (probs won’t need to know def)
Relative scarcity
the def
- Perfect knowledge
- Self-interest
- Unlimted vs limited
Opportunity cost
The def
- the lost of value of one alternative when another alternative is taken
Trade off
the def
all the other opportunities forgone when a choice is made
Cost benefit analysis
the def
- Take pros and cons
- Rational thought
- Informed decisions
3 basic economic questions
their defs
What
* What and how much to produce **
* By the forces of D&S**
* They meet at the equilibrium
How
* Efficient production, Cheap rate without losing quality
* Lowering cost of production
Whom
* Who to produce for
* Which market shall it be produced for?
Tradional ecomony
the 3 economies
What?
essentials and same
How?
labour intensive (pay basically nothing)
Whom?
Social Status (rich v poor) - whoever can afford
Think Africa (poor)
Planned
(Command)
the 3 economies
What?
Government decides
How?
Monopoly, no comp, TE is low
Whom?
reduce income inequality
think communism/socialism (China)
Market economy
the 3 economies
What?
Consumer sovereignty, Self-interest - Con/Prod, D/S determine this- RP
How?
relative prices) Max profit, min production cost)
Whom?
The income of people - many options
Those that can pay
think Australia (mid)
Mixed economy
the 3 economies
What?
Relative prices
How?
Determines by firms
Whom?
Market forces
Economic activity
the def
Income flow
Between sectors – business, consumers, government
Levels of consumption, production, and expenditure
Measured with tools such as GDP.
Material living standers
the def
- Access to goods and services
- Ability and capacity
Non Material living standers
the def
- Intangible aspects
- Effect quality of life
Higher economic activity?
|The factors of MLS and Non-MLS? What happens to them?
MLS increase
- ↑ production
- ↑ employment.
- ↑ income
Non-MLS: good and bad
- ✗Income rises = less stress
- ✓ Increased population
- ✓ increase climate change.
Lower economy activity
What happends when EA decreases?
MLS decrease
**- ↑Unemployment
- ↓Income **
Non-MLS
- ✗increase stress
**- ✗unhappiness **
- ✓ less pollution
- ✓less pressure on environment
Government interventions
the def (what do they do)?
are designed to support the economy through **helping economic agents **
Strong economic activity
what does the gov do when EA is strong?
↑Government tax revenue (e.g., income tax)
↓Social program (e.g., welfare)
Weak economic activity
what does the gov do when EA is weak?
↑Social program (e.g., welfare)
↓Government tax revenue (e.g., income tax)
Traditional viewpoint of CONSUMERS
list a few (or def)
* Consumers act in self interest
* Consumer behaviour
* **Max utility **- max consumption given income
* Rational - know what and how to get
* Informed decision making
* Value for money
* max resources (income/cash)
* Come to market with clear def
* Impacted by supply and demand
Other points
* Income are important
* Unemployment affects ability to spend
* Want choices
* Seek and aims to use decision making
* Interest rates affects spending
* e.g., best price and quality
* Increases living standards
* Relative scarcity
* Price makers, price taker
Use the key word of “market capitalist economy
Traditional viewpoint of BUSINESSES
list a few or the def
- Businesses act in self interest
*** Profit maximisation - Low cost of production**
- Markets tend to produce goods and services that consumers value most
- motivated by profit
- max resources (low cost of production)
- Come to market with clear def
- Impacted by supply and demand
Other points
* Seek productivity
* motivated by consumers buying
* Impacted by government
* Gov could increase cost of production
* low cost of production = more profit
* Public sector = not that much profit
* Private sector everything else but the government
* incentives impacts cost of production
The law of diminishing marginal utility
what does this mean
- each additional thing (unit) of a good or service has less utility (satisfaction) than the previous one.
- best price and opportunity to buy it again if its valid
Allocative efficient
ONE POINT
best combination of needs and wants.
meets demand of society
Satisfies MLS
Dynamic efficient
Movement of points
Speed in which a firm can relocated resources to meet demand in production requirements.
Technically efficient
Multiple points
LOW COP
LOW WASTE
LOW PRICES
Consumers happy
All max output for any given input
Underutilization
Showing poor use of resources
High COP
High waste
e.g., non-productive labour
Unattainable
Outside the curve
Cannot reach with current production
The PPF
what the the def of the production posasibility frontier
Tool to illustrate the tension that exists in producing certain products/services.
* Comparative advantage
* tension between 2 products
* model the opportunity cost.
Macroeconomics
the def
studies the behaviour of the economy as a whole and not just specific companies but entire industries and economies such as economic growth the unemployment rate and inflation.
- Overall economy behave
Inflation, price levels, rate of economic growth, national income, GDP and changes in unemployment
Diff: Micro more complete and detailed than macro
Micro economics
the def
involves an analysis of how the various parts **making **up the total Australian economy (i.e. sectors including individual firms, industries and markets) actually operate.
- Social science
- Decisions
- Distribution of resources
Diff: Micro more complete and detailed than macro
