Topic 1 - Introduction to Economics

Question 1

What is Economics?

Answer 1

Economics is the study of factors affecting the production, consumption, and distribution of goods and services involving individuals, businesses, and government.

Question 2

What are goods?

Answer 2

Tangible products - e.g. a pencil case

Question 3

What are services?

Answer 3

Intangible products - e.g. a haircut

Question 4

What are wants?

Answer 4

Consumers desiring a product that is not necessarily required for survival. (Basic goods and services)

Question 5

What are needs?

Answer 5

Consumers purchasing basic goods and services that are required for general living purposes.

Question 6

What is Scarcity?

Answer 6

A short supply

Question 7

What is the economic problem?

Answer 7

Unlimited wants with limited resource.

Question 8

What are the factors of production?

Answer 8

Resources used to produce goods and services that are wanted and needed by consumers.

Question 9

The 4 factors of production are…

Answer 9

Land, Labour, Capital, Entrepreneurs

Question 10

What is LAND?

Answer 10

Natural resources produced to make various goods and services
Income return for owners: RENT

Question 11

What is LABOUR?

Answer 11

Human labour is utilised to produce goods and services

Income return for owners: WAGES

Question 12

What is CAPITAL?

Answer 12

Equipment used to produce other goods and services

Income return for owners: INTEREST

Question 13

What is ENTREPRENEURSHIP?

Answer 13

Taking risk in utilising the other factors of production for business ventures
Income return for owners: PROFIT

Question 14

These factors of production are bought and sold in the Factor Market … what is the factor market?

Answer 14

Physical or non-physical place where any good and services are bought and sold

Question 15

What opportunity cost?

Answer 15

Occurs when whenever a decision or choice is made.

Question 16

Why does opportunity cost exist?

Answer 16

Scarcity - Finite resources to fulfill infinite wants and needs - requires a DECISION and CHOICE to be made

Question 17

What should be produced?

Answer 17

Dependent on the market

Question 18

How much should be produced?

Answer 18

Dependent on consumer demand

Question 19

How should it be produced?

Answer 19

Dependent on resources availability

Question 20

Who should it be distributed to

Answer 20

Dependent on individuals income

Question 21

Despite taking theses factors into account, opportunity cost of the forgone alternative will still exist - For an economy, this can be drawn out as the PPF..
What is the PPF

Answer 21

Maximum production potential of the economy with given, fixed or finite level of resources.

Question 22

The PPF shows the opportunity cost of each possible production level.
The formula for calculating the cost is …

Answer 22

Opportunity cost =
what is given up
————————–
what is gained

Question 23

Distribution of goods and services in the economy

Answer 23

The level of income is influenced by the individual’s level of education, employment, occupation and productivity

Question 24

What is ‘employment’ ?

Answer 24

Employment refers to individuals that are engaged in paid work

Question 25

What is 'unemployment' ?

Answer 25

Unemployment refers to individuals that are actively seeking for work

Question 26

Employment in Aus is created in the...

Answer 26

Private sector and public sector

Question 27

What are the three main industries of employment ?

Answer 27

Primary industry, secondary industry, tertiary industry

Question 28

What is the primary industry?

Answer 28

Businesses selling raw materials such as agriculture and mining products

Question 29

What is the secondary industry?

Answer 29

Businesses involved in manufacturing or uses raw materials to create finished goods

Question 30

What is the tertiary industry?

Answer 30

Businesses that distribute or sell quinary and quaternary goods and services

Question 31

Quality of Life ?

Answer 31

standard indicators of the QoL include wealth, employment, environment, physical and mental health, education , work status and many others

Question 32

What is Tax revenue?

Answer 32

Tax revenue is for the government which is used to provide public goods and services such as healthcare and education

Question 33

Employment and QoL will also be influenced by the business cycle ...

Answer 33

The business cycle represents the general volatility and fluctuating movements of the economy

Question 34

What is 'GDP' ?

Answer 34

'GDP'= GROSS DOMESTIC PRODUCT measures total production of goods and services in the domestic economy Used as a measurement of ' economic growth'

Question 35

4 PHASES OF A BUSINESS CYCLE?

Answer 35

Trough, expansion, peak, contraction

Question 36

4 PHASES OF A ECONOMIC CYCLE?

Answer 36

Low, increasing, high, decreasing

Question 37

What is the circular flow of income?

Answer 37

The economy is a continuous cycle, it operation is built upon the inter-relationships of various economic sectors; they include household sector, business sector, finance sector, government sector, and international sector

Question 38

PLEASE REFER BACK TO PPT 6 TO SEE HOW ALL SECTORS CAN WORK.

Answer 38

.......

Question 39

What is the equilibrium?

Answer 39

Equilibrium is the state in which market supply and demand balance each other, and as a result prices become stable. Generally, an over-supply of goods or services causes prices to go down, which results in higher demand—while an under-supply or shortage causes prices to go up resulting in less demand.

Question 40

Leakages are

Answer 40

Savings Taxation M-imports 'leakage' meaning they take out the money out of the economy

Question 41

Injections are

Answer 41

Investments Gov spending X exports 'Injections; meaning that they bring money into the economy

Question 42

When the value of leakages and injections are equal to each other, the economy is said to be in EQUILIBIRIUM; This means..

Answer 42

S+T+M = I +G+X

Question 43

When S+T+M is greater than I+G+X....

Answer 43

The economy is contracting and there is DISEQUILIBRIUM - Households will receive less income - Households will reduce spending - Households pay less tax and buy less importas

Question 44

When S+T+M is less then I+G+X...

Answer 44

The economy is expanding and there is DISEQUILIBRIUM - Households will receive more income - Households will increase spending - Households will pay more tax and buy more import