Economics

• Economics


  A social science that deals with the production, consumption, distribution and protection of goods and services to satisfy the unlimited wants and needs of an individual and a society
• Economy


  A system of organizations and institutions that facilitate or play in part in the production and distribution of goods and services in a society
• Economic systems


  • Individual/households
  • Firms and businesses
  • Government
• Economic problem


  Scarcity - there are not enough resources to satisfy a society's unlimited wants and needs
• Utility


  The satisfaction derived or expected to be derived from the consumption of goods and services
• Sectors in an economy

  • Primary sector
  • Secondary sector
  • Tertiary sector
• Opportunity cost


  The next best alternative given up
• Types of opportunity cost

  • Zero opportunity cost
  • Increasing opportunity cost
  • Decreasing opportunity cost
  • Constant opportunity cost
• Production Possibility Frontier (PPF)


  A curve that shows the maximum amounts that can be produced of two products that both depend on the same finite resources for their manufacture
• Points A, B and C on the PPF are efficient as they utilize the resources in the best way possible
• Point X on the PPF is inefficient as the resources are not being utilized properly
• Point Y on the PPF is unattainable as the economy may not have the necessary resources
• Influences on individual economic decisions

  • Past experiences
  • Cognitive biases
  • Escalation of commitment
  • Sex drive
  • Income
  • Age
  • Socioeconomic status
• Influences on firm economic decisions

  • Employment
  • Wages
  • Prices/inflation
  • Interest rates
  • Consumer confidence
• Consumer confidence


  An economic indicator that measures the degree of optimism that consumers have regarding the overall state of a country's economy and their own financial situations
• Production


  The process of creating, growing, manufacturing or improving goods and services
• Productivity


  The efficiency or rate of production, measured as the amount of output per unit of input
• Factors of production


  • Capital
  • Enterprise
  • Land
  • Labor
• Capital


  Assets that allow for increased work productivity, such as physical tools, plants and equipment
• Enterprise


  The coordinating factor, the entrepreneur who organizes the other factors of production into a production unit
• Land


  Naturally occurring resources used to produce goods and services, including physical land, water, oil, copper, natural gas, coal and forests
• Labor


  The physical and mental efforts of people contributed to the production of goods and services
• Rent


  The income that resource owners earn in return for land resources
• Land is the primary factor of production as it provides the necessary natural resources and space for production
• Renewable land/natural resources


  Resources like forests, ethanol that can be replenished
• Non-renewable land/natural resources


  Resources like oil, natural gas, coal that cannot be replenished
• Capital


  Man-made tools and equipment used to produce a product, such as machinery, tools, computers
• Interest


  The income earned by owners of capital resources
• Capital can be a substitute for labor
• Capital


  Any asset that allows for increased work productivity
• Common examples of capital

  • Machinery used in factories
  • Tools
  • Equipment
• Equipment


  Hammers, saws, computers
• Capital resources


  Man-made tools and equipment used to produce a product
• Capital differs based on

  The work and work being done
• Labor


  Perishable in nature, has no storage capacity
• Labor Productivity


  The output that each employed person creates per unit of their time
• Labor Productivity


  • Canadian worker makes 10 loaves of bread in an hour, U.S. worker makes 2 loaves in the same time
• Being more productive


  A worker can do more in the same amount of time, freeing up resources to be used elsewhere
• Determinants of labor productivity

  • Physical capital
  • Human capital
  • Technological change
• Physical capital


  The tools workers have to work with, including plant/factory, equipment, and infrastructure