POB Term 1

• A need is any item use to ensure your survival or to satisfy a basic human need.
• A want is any item to make our lives comfortable and enjoyable.
• The three primary needs are: food, clothing and shelter.
• Three examples of wants are: airconditioning, electricity and a car
• Man is described as an economic animal because he has to make various economic/financial decisions on a daily basis.
• It is important for man to makes these economic decisions because resources are scarce and there is an economic problem.
• Scarcity refers to a situation where there is a limited supply of a good or service or resource and as a result humans beings experience the economic problem.
• The economic problem exist when the human needs and wants are unlimited but the resources to satisfy them are limited.
• Direct production is when human beings create their own goods and services directly from the raw materials they use.
• Indirect production is when good and services were created by other persons.
• Surplus means extra amounts.
• The Barter economy was introduced because of surplus goods.
• Barter: exchange (goods or services) for other goods or services without using money
• Problem associated with barter are: Double coincidence of wants, some goods could not be divided, storage of wealth and there wasn't a fixed value on goods.
• Double coincidence of wants means that all parties must accept what is being traded.
• Good refer to tangible items that can be seen and touched, such as money, cars, and houses.
• Services are intangible because they cannot be seen or touched but they are received.
• Services examples are: transportation, teaching, and healthcare.
• Money refers to any item/commodity that has been authorized to be used as a legal tender and is accepted as a medium of exchange.
• In Trinidad and Tobago the Central Bank is in charge of i) issuing currency notes ii) controlling the money supply
• The Governor of the Central Bank is Mr. Alvin St.Hillaire.
• The currency of Trinidad and Tobago is not made locally
• The TT paper money is made in England and the coins are made in Canada.
• Functions of money: medium of exchange, is used to indicate value and price, can be saved and used later, and money is also be used as a standard for differed payments.
• Currency can be defined as physical notes and coins that are in circulation and recognized by society as a medium of exchange.
• M1- actual currency (coins and paper money)
• M2- actual currencies and near-monies which are assets (land, buildings, houses)
• Fiat money: Money that is backed by the government. It is a medium of exchange because it has been authorized by the Central bank and/or government.
• Representative money: Money that represents commodities such as gold or silver but does not have any intrinsic value on its own.
• Credit money: Money that exists only when there is an agreement between two parties. This type of money includes checks, credit cards, and electronic transfers.
• Commodity money: Money that derives its value from something else other than itself. For example gold or silver.
• Fiduciary money are bank notes and coins that are available for use in the economy. They may or may not be authorized to be used as a medium of exchange by the government.
• Commercial bank money is created by the banking system when it lends out money to businesses and individuals.
• An economic system refers to a mechanism that has been designed to answer the three economic questions in an attempt to efficiently allocate scarce resources.
• The three economic questions are: What to produce, How to produce and For whom to produce.
• The Public Sector is the part of the economy that is owned by the government.
• The public sector motive is to provide social goods such as education, healthcare and transport.
• The public sector funding comes from taxes and donor agencies.
• The Private Sector is the part of the economy that is owned by private individuals or businesses.
• The private sector motive is the make money