Economics Preliminary Notes Topic 1-2
Topic 1: Introduction to Economics
Chapter 1 - What is Economics About
1.1 - The Economic Problem and the Role of Choices
Economics aims to addressing the economic problem of satisfying unlimited wants with the scarcity of resources.
This means that we must prioritise some wants over others.
Our wants are unlimited
Our wants change over time
Types of wants:
Individual wants - the desires of each person
Collective wants - wants of the whole community
The four economic problem:
What to produce
How much to produce
How to produce
How to distribute production
Whenever we choose to produce or consume a product, we miss out on an alternative product that could have been produced using those resources. This is known as the opportunity cost.
1.2 - The Production Possibility Frontier
The Production Possibility Frontier is a graphical representation of all the possible combinations of the production of two goods or services that the economy can produce at any given time.The production possibility frontier (PPF) is used to display the opportunity cost.
We can calculate the opportunity cost by the amount of units loss on a product over the amount of units gained on another product.
Technology advancement causes the PPF to shift outwards.
Changes in the level of resources will alter the position of production in either outwards (when available resources increases) or inwards (when available resources decreases)
When an economy is producing at a point below the PPC it is experiencing unemployment of resources 1.3 - The Future Implications of Choices
An economy that focuses more on the production of capital goods will increase its productive capacity and experience a higher level of economic growth, allowing more satisfaction towards the consumers. Forgoing some wants today so it can satisfy greater number of wants tomorrow.
1.4 - The Economic Factors Underlying Choices
Chapter 1 - What is Economics About
1.1 - The Economic Problem and the Role of Choices
Economics aims to addressing the economic problem of satisfying unlimited wants with the scarcity of resources.
This means that we must prioritise some wants over others.
Our wants are unlimited
Our wants change over time
Types of wants:
Individual wants - the desires of each person
Collective wants - wants of the whole community
The four economic problem:
What to produce
How much to produce
How to produce
How to distribute production
Whenever we choose to produce or consume a product, we miss out on an alternative product that could have been produced using those resources. This is known as the opportunity cost.
1.2 - The Production Possibility Frontier
The Production Possibility Frontier is a graphical representation of all the possible combinations of the production of two goods or services that the economy can produce at any given time.The production possibility frontier (PPF) is used to display the opportunity cost.
We can calculate the opportunity cost by the amount of units loss on a product over the amount of units gained on another product.
Technology advancement causes the PPF to shift outwards.
Changes in the level of resources will alter the position of production in either outwards (when available resources increases) or inwards (when available resources decreases)
When an economy is producing at a point below the PPC it is experiencing unemployment of resources 1.3 - The Future Implications of Choices
An economy that focuses more on the production of capital goods will increase its productive capacity and experience a higher level of economic growth, allowing more satisfaction towards the consumers. Forgoing some wants today so it can satisfy greater number of wants tomorrow.
1.4 - The Economic Factors Underlying Choices