Content Flashcards
(52 cards)
What is economics?
Economics is the study of how individuals, businesses, and governments allocate scarce resources to satisfy competing and unlimited wants.
What is the fundamental problem of economics?
Relative scarcity — the condition where available resources are insufficient to meet society’s unlimited wants and needs.
How does scarcity impact individuals?
Individuals must make choices on how to spend limited income and time, leading to opportunity costs in consumption and lifestyle decisions.
How does scarcity impact businesses?
Firms must make strategic decisions about the allocation of productive inputs to maximise efficiency and profitability.
How does scarcity impact governments?
Governments must prioritise public spending due to limited fiscal resources, often balancing between sectors such as health, education, and infrastructure.
What are needs?
Needs are goods and services essential for human survival and societal well-being, such as food, water, shelter, and healthcare.
What are wants?
Wants are non-essential goods and services that provide utility or satisfaction but are not required for survival; they are infinite and vary across individuals and cultures.
What are recurrent wants?
Wants that reappear after being satisfied, such as food and clothing, illustrating the insatiable nature of human consumption.
What are complementary wants?
Wants that are naturally consumed together (e.g. mobile phone and charger), where the satisfaction of one increases demand for the other.
What are competitive wants?
Wants that are alternatives or substitutes, where satisfying one means forgoing another (e.g. choosing between tea or coffee).
What is opportunity cost?
The value of the next best alternative foregone when a choice is made, reflecting the real economic cost of decision-making.
What is a value judgement in economics?
A subjective assessment that influences individual or policy decisions based on personal values and preferences rather than objective data.
What does the PPC illustrate?
The Production Possibility Curve demonstrates the trade-offs between the production of two goods, highlighting concepts of scarcity, choice, efficiency, and opportunity cost.
What are the 4 assumptions of the PPC?
1) All resources are fully and efficiently utilised,
2) Only two goods are produced,
3) Resources and technology are fixed,
4) Resources are perfectly mobile between goods.
What does a point inside the PPC mean?
It indicates underutilisation of resources, such as unemployment or inefficiencies in production.
What does a point on the PPC mean?
It represents efficient production, where all resources are fully employed.
What does a point outside the PPC mean?
It signifies an unattainable output level given the current resource and technology constraints.
What causes the PPC to shift outward?
Economic growth due to advancements in technology, improvements in education and health, increased labour productivity, or immigration.
What causes the PPC to shift inward?
Economic decline caused by war, natural disasters, famine, or a reduced labour force.
What is an economic model?
A simplified representation of complex economic processes used to analyse, predict, or illustrate real-world behaviour.
What are the 4 factors of production and their income types?
Land (earns rent),
Labour (earns wages),
Capital (earns interest),
Enterprise (earns profit).
What are the 3 fundamental economic questions?
1) What goods and services should be produced?
2) How should they be produced?
3) For whom should they be produced?
What is a subsistence economy?
A traditional economy where production is primarily for personal use and survival rather than market exchange (e.g. PNG).
What is a market economy?
An economic system where decisions on production and pricing are determined by the forces of demand and supply with minimal government intervention.
