Unit 1.1

• Economics is about the scares resources in the world to satisfy the infinite needs of humans and the choices individuals, businesses and government make
• Micro economics is looking at consumer and producers behaviour and choices
• Price averse is when consumers want the best prices for good uality
• Utility maximisers is when consumers want the highest level of satisfaction. So will do anything for that
• Ceteris Paribus Theory is the idea that all things remain the same

  So if a firm increase the price of a product or service, we assume that other factors like consumer income has stayed the same.
• Social science subject are the study of human beings

  For example economics, psychology
• Natural sciences are the study of natural events.

  For example maths, physics
• Positive statement is a fact that can be backed up by evidence or easily proven wrong. e.g his car is green
• Normative statement is an opinionated statement that is non- scientific and difficult to test. E.g his car is ugly
• Value Judgment is another word for opinions
• Factors of production is the input of a business: CELL

  Capital

  Enterprise

  Land

  Labour
• Capital is manmade resources like machinery

  Enterprise is skills needed for decisions so the entrepreneur

  Land is resources found in the natural environment

  Labour is the workforce needed
• Service is an intangible economic output

  Goods is a tangible economic output
• Free Goods are goods that involve no cost. For example sunlight
• Opportunity cost is the cost of giving up one opportunity for the next best alternative.

  Giving up one thing to achieve another
• Scarcity is the basic economic problem that resources are finite but consumer wants and needs are infinite so choices need to be made about which wants and needs to satisfy
• Economic activity is what is being done in order to satisfy human wants and needs.
• Scientific Methodology

  1. Observe consumer behaviour
  2. Form a hypothesis on how consumers spend their money
  3. Develop predictions
  4. Use evidence to test predictions

  If evidence supports hypothesis it becomes the theory off demand if not, it is rejected or amended.