Unit 1 AOS 1 Flashcards
(26 cards)
economics
the study of how limited resources are used to satisfy unlimited human desires
microeconomics
examines the operation of the smaller parts that make up the wider Australian economy. It focuses on a single firm / industry / sector / market
macroeconomics
examines the workings of the Australian economy as a whole. It focuses on spending / output / unemployment / inflation / living standards nationally
positive economics
provides objective analysis of what is / has been occurring in an economy
normative economics
provides recommendations on how the economy ought to run based on personal value judgements
needs
essential goods and services needed for survival (water / food / shelter / clothing)
wants
goods and services that make life more enjoyable
natural resources
raw materials found in nature that are used to produce goods and services
labour resources
intellectual skills / knowledge / manual effort that individuals provide to produce goods and services
capital resources
man-made physical assets used in the production process
relative scarcity
limited resources are outnumbered by society’s unlimited wants –> choices must be made about which needs / wants to satisfy first and how to best allocate resources to do so
opportunity cost
benefits forgone by the decision not to direct resources into the next best alternative use
production possibility diagram (PPD)
used to illustrate the possible quantities of two products a nation can produce when all available resources are used efficiently
trade offs
when individuals / businesses / gov make choices about the different ways in which limited resources may be used for consumption / production
cost-benefit analysis
adding up value of all anticipated direct /indirect short-term / long-term costs of a particular economic choice
and then comparing them against value of all anticipated benefits to arrive at most beneficial decision overall
economy / economic system
collection of national institutions / organsiations that coordinate the production / distribution of goods / services and incomes among the population
market failure
when resources are not allocated in ways that maximise society’s overall living standards, requiring gov intervention
economic activity
the process by which an economy uses resources to produce goods / services
economic agents
a person / entity that plays an active role in a nation’s economy
incentives
actions gov uses to encourage desirable behaviour from households / businesses
disincentives
actions gov uses to discourage undesirable behaviour from households / businesses
traditional viewpoint of consumer behaviour
consumers act rationally / in their self interest
consumers make informed / smart decision
consumers maximise utility / marginal benefits from consumption
consumers have ordered preferences
traditional viewpoint of businesses
seek to maximise their profits by reducing production costs or maximising their sales
traditional viewpoint of gov
to maximise society’s living standards
