economics

• 3 economic agents

  businesses

  consumers

  government
• consumers / households

  demand goods and services

  provide labour force

  objective is to maximise own satisfaction
• businesses / producers

  produce goods or services

  aims to maximise profit
• government

  use taxation, spending and regulations to influence economy

  give benefits to manage poverty

  aims to maximise welfare
• rationality


  assuming that each economic agent acts in their own best interests therefore make decisions only based of trying to achieve their aims
• scarcity 


  unlimited wants but limited resources
• factors of production


  land

  labour

  capital

  enterprise
• enterprise


  business decisions

  manager
• land


  natural resources and the land
• labour


  physical effort to produce a good or service

  workforce
• capital


  man-made things like machinery
• production sectors

  primary

  secondary

  tertiary
• primary stage


  extraction of raw materials - miners
• secondary


  uses raw materials into goods - construction
• tertiary


  provides a service - teacher
• planned economy


  government controlled

  kind of like socialism

  don't reward hard work
• disadv of planned


  workers can lack motivation

  limits freedom
• mixed economy


  contains both large market sector and non-market sector

  kind of like democratic socialism

  high taxes
• free market


  not controlled by government

  controlled by consumer spending pattern

  consumer preference controls allocation of resources
• positive statement


  can be proven right or wrong
• normative statement


  based off of opinions
• specialisation


  when people concentrate on a certain skill and areas.

  pros:

  more employable

  higher production

  more efficient

  can earn more money
• cons of specialisation

  can become boring and repetitive if only doing one area

  change in technology can leave your job obsolete

  can block other career paths
• types of demand 


  joint

  competitive

  composite

  derived
• joint demand


  products which are bought to be used together - complimentary
• competitive demand


  products which are alternatives for each other - substitutes
• composite demand


  products which have more than one use
• derived demand


  demand for one product is reliant on the demand of another
• demand definition

  the quantity of a good consumers are willing and able to purchase at a given price over a period of time
• factors that shift demand curve

  population

  advertisement

  price of substitutes

  interest rate

  income

  trends
• supply definition


  the quantity of goods and services that producers are willing and able to produce at a given price over time
• law of supply


  price and quantity demanded have a positive relationship
• factors that shift supply curve

  cost of production

  technology

  number of competitors

  taxes or subsidies

  weather

  investment
• consumer surplus 


  difference between the price the consumer is willing and able to pay for a good or service and the price they actually pay
• consumer surplus


  1

  
• producer surplus


  difference between the price producers are willing to sell products for and the price they actually sell for
• producer surplus


  1

  
• surplus


  excess supply
• shortage


  excess demand
• market changes


  increase demand

  decrease demand

  increase supply

  decrease supply