Introduction to economics

Question 1

Farmers terms of trade…

Answer 1

…

Question 2

Define macroeconomics

Answer 2

national economic aggregates or how the economy performs

Question 3

Define microeconomics

Answer 3

the study of economic decision making and behaviour of individual producers and consumers and their interaction in markets

Question 4

T or F - Australia is one of the worlds most market based economies

Answer 4

true

Question 5

T or F - most economic systems are market based

Answer 5

false - most are a mixture of market based AND centrally planned systems

Question 6

Define a market-based economy

Answer 6

economic system in which prices are based on supply and demand - incorporates the ‘invisible hand’ concept

Question 7

Define the ‘invisible hand’ concept

Answer 7

voluntary exchange where buyer & seller tend to be better off after exchange ie. maximising one’s self interest tends to also maximise interests of society as a whole -> minimises government intervention (central regulation)

Question 8

Example of ‘invisible hand’

Answer 8

top vets end up with more of the resources via efficient allocation of resources

Question 9

T or F - a market based economy and a Capitalist system operate with a similar principle

Answer 9

true - based on private property & private enterprise

Question 10

Define a Centrally planned economy

Answer 10

economic system where gov reckons it can achieve better outcomes for people rather than leaving it to the market aka. Command Economy eg. Communism - Long lines and toilet paper…

Question 11

Define opportunity cost

Answer 11

the allocation of a resource to a particular use which means it cannot be used in another application ie. the implicit cost of the next best alternative in a set of choices

Question 12

Define utility

Answer 12

satisfaction ie. placing a ‘value’ on something eg. treating a dog for $1200 rather than euthanising it means the dog has a greater utility than the $1200

Question 13

The 4 factors of production?

Answer 13

• land
• labour
• capital
• management

Question 14

Define commodity

Answer 14

a standardised good, traded in bulk whose units are interchangeable and must lack value-adding or processing

Question 15

Commodities account for about ?% of Australia’s total export earnings

Answer 15

60%

Question 16

Agriculture represents about ?% of the export earnings

Answer 16

25%

Question 17

What is the ‘farm problem’? (hint: declining terms of trade)

Answer 17

the falling income of farmers compared to the rest of society, decrease numbers of farms and great instability of income from farms

Question 18

Define farmers terms of trade. formula?

Answer 18

ratio of index of prices received by farmers to the index of prices paid for their inputs
Terms of trade = Prices received for output / Cost of inputs

Question 19

define productivity

Answer 19

amount of output per unit of input eg. lambs/100 ewes, kg beef/hectare

Question 20

define Engel’s law

Answer 20

when family’s income increases, proportion of money spent on food decreases

Question 21

Re. trends in Australian agriculture - the share of rural sector (farm, forestry, fishing & hunting) output of Gross Domestic Product (GDP) more than ?% in early 1950’s to % in the 2003-2004

Answer 21

The share of rural sector (including farm, forestry, fishing and hunting) output of Gross Domestic Product (GDP) has declined from more than 20% in the early 1950s to less than 3.0% in the 2003-4

Question 22

Re. trends in Australian agriculture - By gross value of production the four most important agricultural commodity groups are?

Answer 22

wheat, wool, beef & veal, and dairy

Question 23

Re. trends in Australian agriculture - There has been a consistent trend for prices paid by farmers (i.e. costs) to increase faster than prices received by farmers. This is also known as

Answer 23

the cost-price squeeze

Question 24

Re. trends in Australian agriculture - T or F - Farming, although declining in relative size, has strengthening links with other sectors of the economy

Answer 24

true

Question 25

Re. trends in Australian agriculture - why is Australia affected by agricultural policies of the world’s major exporters & importers?

Answer 25

Because Australian broad-acre agriculture is heavily dependant on export markets. This high exposure to trade makes Australia sensitive to the agricultural policies of the world’s major exporters and importers

Question 26

Re. trends in Australian agriculture - why must farmers be more aware, informed, and self-reliant?

Answer 26

Because of the increased reliance on market mechanisms & less reliance on government intervention for economic & market management