Introduction to Economics, Market Systems, Demand and Supply, Elasticities, Market Structures
Introduction to Economics
Economics: A social science
-A study of how people make decisions regarding the allocation of scarce resources to satisfy unlimited wants.
Scarcity: Basic problem of Economics
-Due to lack of resources (time, productive forces, etc) some opportunities must be forgone
Opportunity cost
-Next best alternative forgone when an Economic decision is made
Can only forego known alternatives
No choices/options will mean no cost
Ceteris Paribus: ‘Other things being equal’
-Assumption in economic models, seeing the effect of only changing one variable.
Types of goods
-Economic goods
The more the better
Relatively scarce and thus carries opportunity cost
-Free goods
No opportunity cost as it is abundant
Sectors of the economy
-Private
Resources owned by individuals
-Public
Resources owned by the State (E.g. Healthcare)
Sectors of industry
Primary: Extraction of resources (metal, wood, fish)
Secondary: Adding value on to extracted resources (can manufacture)
Tertiary: Service industry (banking)
Factors of production
-Land
Natural resources
-Labour
Human resources; workforce
-Capital
Financial → Cash
Physical → Machinery
-Enterprise (risk-takers)
Organise other factors and allocate resources to reach goal
Market systems
-Free market
Consumers buy; Producers sell without government intervention
Invisible hand of competition will facilitate the market
-Planned economy
All decisions are made by the central government in the economy
State monopoly
Free market:
Advantages
Disadvantages
Effective and efficient as there is competition
Essential services (healthcare) may not be existent at all
Quality guaranteed due to competition
Customers exploited if firms colluded and monopolies could gain too much power
Stimulates economy as there is more freedom, creativity, and motivation
The weak will suffer (E.g. disabled people unlikely to be employed
Price works as a demand indication and
Economics: A social science
-A study of how people make decisions regarding the allocation of scarce resources to satisfy unlimited wants.
Scarcity: Basic problem of Economics
-Due to lack of resources (time, productive forces, etc) some opportunities must be forgone
Opportunity cost
-Next best alternative forgone when an Economic decision is made
Can only forego known alternatives
No choices/options will mean no cost
Ceteris Paribus: ‘Other things being equal’
-Assumption in economic models, seeing the effect of only changing one variable.
Types of goods
-Economic goods
The more the better
Relatively scarce and thus carries opportunity cost
-Free goods
No opportunity cost as it is abundant
Sectors of the economy
-Private
Resources owned by individuals
-Public
Resources owned by the State (E.g. Healthcare)
Sectors of industry
Primary: Extraction of resources (metal, wood, fish)
Secondary: Adding value on to extracted resources (can manufacture)
Tertiary: Service industry (banking)
Factors of production
-Land
Natural resources
-Labour
Human resources; workforce
-Capital
Financial → Cash
Physical → Machinery
-Enterprise (risk-takers)
Organise other factors and allocate resources to reach goal
Market systems
-Free market
Consumers buy; Producers sell without government intervention
Invisible hand of competition will facilitate the market
-Planned economy
All decisions are made by the central government in the economy
State monopoly
Free market:
Advantages
Disadvantages
Effective and efficient as there is competition
Essential services (healthcare) may not be existent at all
Quality guaranteed due to competition
Customers exploited if firms colluded and monopolies could gain too much power
Stimulates economy as there is more freedom, creativity, and motivation
The weak will suffer (E.g. disabled people unlikely to be employed
Price works as a demand indication and