UNIT 1 AOS 1

Question 1

Economic agent

Answer 1

Economic agents are participates in any given economy which includes businesses, households and governments

Question 2

Incentive

Answer 2

An incentive encourages or discourages economic agents to make particular choices

Question 3

Consumer positive incentive

Answer 3

Promote buying using and endorsing behaviours that support positive impacts (externalities)

Question 4

Consumer negative incentive

Answer 4

Discourages behaviours that results in undesirable outcomes (negative externalizes)

Question 5

Producer positive incentives

Answer 5

Promote greater production and behaviour that improve living standards

Question 6

producer negative incentives

Answer 6

discourages production of demerit goods

Question 7

Public Sector

Answer 7

• **Essential community services **
• Provided by the Governments
• Wages paid by the government (for diff)
• eg, postal service, public schools, healthcare, roads

Question 8

Private Sector

Answer 8

• profit originated businesses run by individuals/groups to make a profit
• Wages are paid by those companies
• eg, CBA, milk bar, consulting firm, private schools

Question 9

Factors of production

the 4 factors of production and their defs

Answer 9

Land
Any natural resource provided by nature and used in the process of production. e.g., mining land

Labour
The mental and physical capacity of workers to produce goods and services.

Capital
human-made goods - not directly consumed by humans, used for produce other goods and services that can be consumed.

Ebtreorebership
Combines all other factors of production to create a good or service (probs won’t need to know def)

Question 10

Relative scarcity

the def

Answer 10

• Perfect knowledge
• Self-interest
• Unlimted vs limited

Question 11

Opportunity cost

The def

Answer 11

• the lost of value of one alternative when another alternative is taken

Question 12

Trade off

the def

Answer 12

all the other opportunities forgone when a choice is made

Question 13

Cost benefit analysis

the def

Answer 13

• Take pros and cons
• Rational thought
• Informed decisions

Question 14

3 basic economic questions

their defs

Answer 14

What
* What and how much to produce **
* By the forces of D&S**
* They meet at the equilibrium

How
* Efficient production, Cheap rate without losing quality
* Lowering cost of production

Whom
* Who to produce for
* Which market shall it be produced for?

Question 15

Tradional ecomony

the 3 economies

Answer 15

What?
essentials and same
How?
labour intensive (pay basically nothing)
Whom?
Social Status (rich v poor) - whoever can afford

Think Africa (poor)

Question 16

Planned
(Command)

the 3 economies

Answer 16

What?
Government decides
How?
Monopoly, no comp, TE is low
Whom?
reduce income inequality

think communism/socialism (China)

Question 17

Market economy

the 3 economies

Answer 17

What?
Consumer sovereignty, Self-interest - Con/Prod, D/S determine this- RP
How?
relative prices) Max profit, min production cost)
Whom?
The income of people - many options
Those that can pay

think Australia (mid)

Question 18

Mixed economy

the 3 economies

Answer 18

What?
Relative prices
How?
Determines by firms
Whom?
Market forces

Question 19

Economic activity

the def

Answer 19

Income flow
Between sectors – business, consumers, government
Levels of consumption, production, and expenditure
Measured with tools such as GDP.

Question 20

Material living standers

the def

Answer 20

• Access to goods and services
• Ability and capacity

Question 21

Non Material living standers

the def

Answer 21

• Intangible aspects
• Effect quality of life

Question 22

Higher economic activity?

|The factors of MLS and Non-MLS? What happens to them?

Answer 22

MLS increase
- ↑ production
- ↑ employment.
- ↑ income
Non-MLS: good and bad
- ✗Income rises = less stress
- ✓ Increased population
- ✓ increase climate change.

Question 23

Lower economy activity

What happends when EA decreases?

Answer 23

MLS decrease
**- ↑Unemployment
- ↓Income **
Non-MLS
- ✗increase stress
**- ✗unhappiness **
- ✓ less pollution
- ✓less pressure on environment

Question 24

Government interventions

the def (what do they do)?

Answer 24

are designed to support the economy through **helping economic agents **

Question 25

Strong economic activity | what does the gov do when EA is strong?

Answer 25

↑Government tax revenue (e.g., income tax) ↓Social program (e.g., welfare)

Question 26

Weak economic activity | what does the gov do when EA is weak?

Answer 26

↑Social program (e.g., welfare) ↓Government tax revenue (e.g., income tax)

Question 27

Traditional viewpoint of CONSUMERS | list a few (or def)

Answer 27

*** Consumers act in self interest * Consumer behaviour** * **Max utility **- max consumption given income * Rational - know what and how to get * Informed decision making * Value for money * max resources (income/cash) * Come to market with clear def * Impacted by supply and demand Other points * Income are important * Unemployment affects ability to spend * Want choices * Seek and aims to use decision making * Interest rates affects spending * e.g., best price and quality * Increases living standards * Relative scarcity * Price makers, price taker ## Footnote Use the key word of “market capitalist economy

Question 28

Traditional viewpoint of BUSINESSES | list a few or the def

Answer 28

* Businesses act in self interest *** Profit maximisation * Low cost of production** * Markets tend to produce goods and services that consumers value most * motivated by profit * max resources (low cost of production) * Come to market with clear def * Impacted by supply and demand Other points * Seek productivity * motivated by consumers buying * Impacted by government * Gov could increase cost of production * low cost of production = more profit * Public sector = not that much profit * Private sector everything else but the government * incentives impacts cost of production

Question 29

The law of diminishing marginal utility | what does this mean

Answer 29

* each a**dditional thing (unit) **of a good or service has** less utility** (satisfaction) than the **previous one.** * best price and opportunity to buy it again if its valid

Question 30

Allocative efficient

Answer 30

ONE POINT best combination of needs and wants. meets demand of society Satisfies MLS

Question 31

Dynamic efficient

Answer 31

Movement of points Speed in which a firm can relocated resources to meet demand in production requirements.

Question 32

Technically efficient

Answer 32

Multiple points LOW COP LOW WASTE LOW PRICES Consumers happy All max output for any given input

Question 33

Underutilization

Answer 33

Showing poor use of resources High COP High waste e.g., non-productive labour

Question 34

Unattainable

Answer 34

Outside the curve Cannot reach with current production

Question 35

The PPF | what the the def of the production posasibility frontier

Answer 35

Tool to i**llustrate the tension** that exists in producing certain products/services. * Comparative advantage * tension between 2 products * **model the opportunity cost.**

Question 36

Macroeconomics | the def

Answer 36

studies the behaviour of the economy **as a whole** and not just specific companies but **entire industries and economies** such as economic growth the unemployment rate and inflation. - Overall economy behave Inflation, price levels, rate of economic growth, national income, GDP and changes in unemployment ## Footnote Diff: Micro more complete and detailed than macro

Question 37

Micro economics | the def

Answer 37

involves an analysis of how the v**arious parts** **making **up the **total Australian economy** (i.e. sectors including individual firms, industries and markets) actually **operate.** - Social science - Decisions - Distribution of resources ## Footnote Diff: Micro more complete and detailed than macro