Econ

• Economics

  A social science that is concerned with the production, consumption, and transfer of wealth
• Social science

  • Studies society and relationships of individuals
• Economics

  • Suggests the economic behaviour of individuals and groups and the economic relationships
• Scientific methodology

  1. Observing consumer behaviour in marketplace

  2. Forming a hypothesis to explain how consumers spend

  3. Developing predictions from hypothesis

  4. Using evidence to test predictions

  5. The evidence does not support the predictions hypothesis is amended or rejected

  6. Concluded that the evidence supports the hypothesis which becomes theory of demand
• Natural science theories are much harder to prove than social sciences requires evidence
• Economic theories survive through allowing a significant number of exceptions to their predictions
• Criticism responses argue they are concerned on 'positive economics' which is asked on strict scientific methodology 'What is' 'what will happen'
• Goods

  Tangible items (can touch)
• Services

  Work and systems provided to you (intangible)
• Needs

  Essential to survival (water,food, warmth)
• Wants

  Something you would like to have yet non essential (phones, cars)
• Economic welfare

  Well-being of an individual, group or economy
• Economic agents


  • Consumers - people who buy things
  • Producers - firms, businesses, make and provide
  • Government- oversee interactions of consumers and producers (legally) and act as consumers/ producers
• Factors of production

  • Land - all natural resources used in the production of goods and services (oil, timber, fish)
  • Labour - human effort used in production of goods and services
  • Capital - Anything man made used in production of goods and services (tables, factories)
  • Enterprise - takes initiative of organising land, labour and capital
• Renewable resource

  With careful management can be renewed as its used
• Finite resource

  Scarce and runs out as it is used
• Often only a small fraction/ scale of renewable resources can be used
• Production and consumption activities taking place in the economy, affect and often damage the natural environment
• Environmental resources are part of factors of production 'free gifts of nature' is questioned in populated regions where air and clean water are scarce. We must reduce the effects of pollution.
• Resources

  Something used to produce output
• Production

  The process of combining scarce resources to make an output
• Productivity

  Output per unit of input ( per period of time)
• Labour productivity

  Output per worker (per period of time)
• Sectors of economy


  • Primary - extraction of raw materials (mining, farming, oil)
  • Secondary - Where raw material are manufactured (car, furniture manufacturing)
  • Tertiary - Service sector (banking, tourism, education)
• Scarcity

  Arises from the fact that economic agents have unlimited wants but finite resources
• Opportunity cost

  The next best alternative foregone (when making an economic decision)
• Market

  Where buyers and sellers interact in order to establish price
• Factor markets

  The markets for the factors of production
• Product markets

  The markets for the goods and services (products) that we buy
• Allocation of resources

  In a market economy, resources are allocated through the free working of the market (price) mechanism of demand and supply
• Planned economy

  Government decides who works where, who produces what (complete control)
• Free economy


  Government plays no part on the market (no intervention)
• Nationalised

  Government takes into control
• Privatised

  Removed from government control
• PPP (purchasing power parity)

  Measuring prices at different locations
• Per capita

  Per person
• Consumer sovereignty

  Consumers have a wider choice of goods
• Key economic decisions


  • What to produce? - which goods and services and in what quantities , given available resources
  • How to produce? Methods used, capital or labour intensive
  • For whom? - how is the output distributed
• Production possibility frontier (PPFs)

  Shows the maximum amount an economy can produce, given its current resources
• Below the curve, not all resources are being used