Introduction to Economics & Research

• Economic Activity?


  How much buying and selling goes on in the economy over a period of time
• Economy?


  All the production and exchange activities that take place
• An example of a medium of exchange?


  Money
• Households?


  Individuals purchase goods/services
• Firms?


  Organizations, which buy these factors and use them to produce goods/services
• What represents the level of Economic Activity?


  The amount of interaction between households and firms
• "The more buying and selling = the higher the level of economic activity."


  True
• 3 Questions?


  What, how, who
• Factors of production?


  Land, labour, capital
• What represents the "land"?


  All the natural resources (oil, gold, fish in the sea)
• What represents the "labour"?


  Human effort (mental + physical) that goes into production (factory worker, teacher)
• What represents the "capital"?


  The equipment and structures used to produce goods/services (machinery, computers)
• Scarcity?


  The limited nature of society's resources
• Need?


  Necessities for survival (food, water, healthcare)
• Want?


  Desire - comfortable and enjoyable life (holidays, leisure activities)
• Economics?


  The study of how society manages its scarce resources
• Trade-off?


  To get one thing we like, we usually must give up another thing
• Equity?


  Fairness - the property of distributing economic prosperity fairly among the members of society
• Efficiency?


  Ways in which society gets the most it can from its scarce resources
• Opportunity cost?


  Whatever must be given up to obtain some item
• Making decisions requires comparing what?


  The cost and benefit of the alternative
• Opportunity cost is the measure of?

  Options sacrificed
• Calculating OC?


  y = sacrifice of good (x)/gain in good (y)
• Marginal Changes?


  small, incremental adjustments to an existing plan of action
• Economic Agents?


  Individual, firm, organisation that impacts economy
• Rational?


  The assumption that decision-makers can make consistent choices between alternatives
• "Thinking at the margin"?


  Decision-makers choose MC=MB
• "The behaviour changes if the cost and benefit changes."

  True
• Unintended consequences?


  Unexpected outcome - not foreseen by those who took action
• Positive-sum?


  Everyone gets something
• Zero-sum?


  Outcome is 0
• What does trading allow countries?

  Specialising in activities they do best - improve the standard of living
• What is a con of trading?

  Competition from developing countries
• Economic system?


  The way in which resources are organised and allocated to provide for the need of an economy's citizen
• Capitalist economic system?


  A system which relies on the private ownership of the factors of production to produce goods/services which are exchanged through a price mechanism and where production is operated primarily for profit
• "Capitalist economic system have NOT proved capable of rising the standard of living over the last 200 years."

  False
• What is the profit motive?


  Provides incentives for entrepreneurs to take risks - contribute to economic development
• Market Economy?


  An economy that addresses the 3 key questions of the economic problem by allocating resources through the decentralised decision of many firms and households as they interact in markets for goods/services
• Planned economic system?


  Economic activity organised by central planners who decide on the answers to the fundamental economic questions
• In a pure market economy (without government intervention) many buyers/sellers are interested in?

  own well-being