Economics

• Needs


  Goods or services that consumers consider necessary to maintain their standard of living
• Wants


  Goods or services that are desired in order to provide satisfaction to the consumer, but are not necessary to meet basic needs
• Scarcity


  The problem of having unlimited wants and needs but having limited resources
• Resources are not unlimited
• We cannot have everything we want
• We do not have unlimited resources
• Scarcity is the problem of having unlimited wants and needs but having limited resources
• Because things are scarce

  Nations have to decide the most efficient way to satisfy its citizens unlimited wants with limited resources
• Deciding which product to produce with limited resources

  1. Consider the needs of citizens

  2. Evaluate the available resources

  3. Choose the product that best satisfies needs with the limited resources
• Humankind has unlimited wants
• Resources are limited
• Economic resources


  • Land
  • Labour
  • Capital
  • Enterprise
• Land


  Resources found in nature, including rainfall, mineral deposits and forests
• Labour


  People who are employed by businesses or the government, including doctors, teachers, builders and more
• Capital


  Resources created by combining land and labour, including highways, schools, factories, electricity grids and more
• Enterprise


  Individuals who combine the other resources to create value, such as entrepreneurs that risk and start businesses, hoping to make profit
• 1. Sector Circular Flow Model

  A way of illustrating how money, goods and services flow around an economy
• The 5-Sector Circular Flow Model

  1. Household sector

  2. Firms/Business sector

  3. Financial sector

  4. Government sector

  5. Overseas sector
• Money is transferred between households (consumers) and firms / businesses (producers)


  Money is exchanged for work done or for goods and services
• Financial sector


  • Banks allow households and businesses to store additional money (savings) and provide them with interest
  • Banks use the money to assist other households and businesses via loans
• Government sector


  • Includes all levels of government and the products and services they provide
  • Both households and businesses pay taxes to the government and receive benefits and payments from the government
• Overseas sector


  • Where Australia's economy interacts with the other economies of the world
  • Occurs when purchasing a product (good or service) from an overseas business (IMPORT)
  • Occurs when a business sells a product to an overseas consumer and brings their money into Australia (EXPORT)
• Injections


  Transactions that put money into the economy - the money is being utilised elsewhere in the economy
• Leakages


  Transactions that take money out of the economy - the money is not being utilised elsewhere in the economy
• An individual decides to reduce their spending to increase savings


  This represents a leakage from the circular flow
• Injections


  Come from the right side of the Circular Flow Model
• Leakages


  Come from the left side of the Circular Flow Model
• Circular flow


  Households provide resources to firms in exchange for an income, firms produce goods and services and sell them to households
• Buyers and Sellers in the market

  Are heavily influenced by price
• Factors that can influence prices


  • Availability of a product
  • Popularity of a product
  • State of the economy
• Demand


  The amount of a good or service consumers are willing and able to purchase at a particular price
• If price is high

  Demand will be low
• If price is low


  Demand will be high
• Demand and price have a negative relationship because the more expensive products becomes, consumers become less willing and able to purchase them. But, as the price of goods decrease, the more willing and able consumers become.
• Demand Curve


  • Reflects the relationship between price and quantity demanded
  • Has a vertical axis labelled 'Price' and a horizontal axis labelled 'Quantity'
• A change in quantity demanded


  Comes about when prices change, shown by a movement along the demand curve
• Supply


  The amount of a good or service producers are willing and able to sell at a particular price
• Supply and price have a positive relationship because the more expensive products become, the more willing and able producers become to selling it. But, as the price of a good decreases, the less willing and able producers become.
• Sale price


  Businesses set the price lower because they may have an oversupply or they have a new product they want to launch and increase enthusiasm for
• Premium price


  A marketing strategy where you pay for the name associated with the product