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Economics
- Foundation of Economics
- Scarcity
- Lack of resources. Emphasis
that there are not enough
resources to meet all people's
wants. As a result choices
has to be made.
- Waste is expensive therefore they
have to use resources efficiently.
- Lack of resources. Emphasis
that there are not enough
resources to meet all people's
wants. As a result choices
has to be made.
- Opportunity cost
- "The next best alternative
forgone when an economic
decision is made.
- you have 100$ and you want
to buy a bag (98$) and a dress
(95$).You can't buy both so if
you buy the bag the dress will
be the opportunity cost.
- you have 100$ and you want
to buy a bag (98$) and a dress
(95$).You can't buy both so if
you buy the bag the dress will
be the opportunity cost.
- "The next best alternative
forgone when an economic
decision is made.
- Factors Of Productions
- 2.Labour
- These are the
human resources
that are used to
produce goods
and services.
- Workers.
- un-skilled
- semi-skilled
- Skilled
- un-skilled
- Workers.
- These are the
human resources
that are used to
produce goods
and services.
- 4.Enterprise
- is the organisation where all
factors of production are
together. Entrepreneur are
risk takers.
- is the organisation where all
factors of production are
together. Entrepreneur are
risk takers.
- These refer to 4 resources
that allows an economy to
produce its output.
- 1.Land
- It's the earth's natural resources
- trees
- oil
- Land itself
- pay a rent
- pay a rent
- trees
- It's the earth's natural resources
- 3.Capital
- Refers to the
investment in
manufactured
resources. AND.
investment in human
capita.
- Machinery,
factories and
roads
- Education and
health care
- Machinery,
factories and
roads
- Refers to the
investment in
manufactured
resources. AND.
investment in human
capita.
- 2.Labour
- Scarcity
- Demand
- Definition
- Is the willingness and ability of
consumers to buy a quantity of a good
or service at a certain price. (in a given time period
- Is the willingness and ability of
consumers to buy a quantity of a good
or service at a certain price. (in a given time period
- Markets
- Define as a process or institute in which
producers and consumers interact in order to
sell or buy a good or service.
- Define as a process or institute in which
producers and consumers interact in order to
sell or buy a good or service.
- The Law of Demand
- Definition
- As the price of a product falls, the quantity
demand of a product increases and when the
price of a product increases, the quantity
demanded falls.
- As the price of a product falls, the quantity
demand of a product increases and when the
price of a product increases, the quantity
demanded falls.
- Definition
- Demand Schedule
- Is a table giving the quantities
demanded at a range of
prices.
- Is a table giving the quantities
demanded at a range of
prices.
- Demand Curves
- It plots the information on a graph with the price on the Y-axis
and the quantity demanded on the X-axis.
- A change in the price of the product will lead to a change in the quantity
demanded of the product. There is a movement along the demand curve.
- Downward Slope
- It plots the information on a graph with the price on the Y-axis
and the quantity demanded on the X-axis.
- The Increase in Demand is due to:
- Income
- When the price of a good falls, people
will have have an increase in their
real-life income. Likely to buy more.
- When the price of a good falls, people
will have have an increase in their
real-life income. Likely to buy more.
- Substitution Effect
- When the price of a product falls the product
will become more attractive to people than
other similar products whose prices have stayed the
same.
- When the price of a product falls the product
will become more attractive to people than
other similar products whose prices have stayed the
same.
- Income
- Non Price Determinant of Demand:
- Income
- Inferior Goods
- As income rises, demand for the
product will fall as the consumers
starts to buy higher priced substitutes
instead.
- Public Transport
- Butter and Margarine
- Rice and bread.
- As income rises, the demand curve will
shift to the left.
- own brand products at the
supermarket
- As income rises, demand for the
product will fall as the consumers
starts to buy higher priced substitutes
instead.
- 2 types of products to consider when looking at how
a change in income affects the demand for a
product.
- Normal Goods
- As income rises, the demand for the
product will also rise.
- As income rises, the
demand curve for normal
goods will shift -----> to the
right.
- Size of shift depends on the good.
- As income rises, the
demand curve for normal
goods will shift -----> to the
right.
- As income rises, the demand for the
product will also rise.
- Inferior Goods
- Leads to a shift in the demand curve
either to the right or to the left.
- Make the ceteris paribus assumption
- Make the ceteris paribus assumption
- The price of other goods
- Substitutes
- If products are substitutes for each other, then a change in
the price of one of the product will lead to change in the
demand for the other product.
- Coca Cola and Pepsi
- Chicken and Beef
- If there is a fall in the price of chicken, there
will be an increase in the quantity demanded
of chicken and a fall in the demand for beef.
- If there is a fall in the price of chicken, there
will be an increase in the quantity demanded
of chicken and a fall in the demand for beef.
- This could lead to a
movement along the
demand curve for chicken.
- And a shift to the
left of the demand
curve for beef.
- And a shift to the
left of the demand
curve for beef.
- If products are substitutes for each other, then a change in
the price of one of the product will lead to change in the
demand for the other product.
- Complements
- Products purchased together.
- Cars and petrol
- DVD player and DVD's
- Tennis racket and tennis ball
- Cars and petrol
- If the price of one product change it will lead to a change in
demand for for the other products.
- If there is a fall in the price of DVD players, then there
will be an increase in the quantity demanded of DVD
player and also an increase in the demand for DVD's,
which are complements.
- If there is a fall in the price of DVD players, then there
will be an increase in the quantity demanded of DVD
player and also an increase in the demand for DVD's,
which are complements.
- Products purchased together.
- Unrelated Goods
- Products that have nothing in common
- A change in the price of one product
will have no effect upon the demand
for the other good
- An increase in the price of rice will have no
impact upon the demand for clothes
- An increase in the price of rice will have no
impact upon the demand for clothes
- Products that have nothing in common
- Substitutes
- Tastes and Preferences
- Firms tries to attempt to influence tastes by marketing, so
that they can shift the demand curve for their product to the
right
- Firms tries to attempt to influence tastes by marketing, so
that they can shift the demand curve for their product to the
right
- Other Factors
- The Size of the Population
- pop size increases = demand
for most products will increase.
- Shift to the right
- Shift to the right
- pop size increases = demand
for most products will increase.
- Age structure of the population
- Ageing pop
- Demand more for walking sticks and nursing homes.
- Demand more for walking sticks and nursing homes.
- Young pop
- Demand more for schools, teachers, clothes shops.
- Demand more for schools, teachers, clothes shops.
- Ageing pop
- The Size of the Population
- Income
- Definition
- Supply
- Definition
- The willingness and ability of a
producer to produce a quantity
of goods or service at a certain
price (in given time period).
- The willingness and ability of a
producer to produce a quantity
of goods or service at a certain
price (in given time period).
- The law of Supply.
- States as the price of
a product rise, the
quantity supplied will
usually increase,
ceteris paribus.
- The curve will normally
slope upwards.
- Can be illustrated by
schedule or a supply
curve
- States as the price of
a product rise, the
quantity supplied will
usually increase,
ceteris paribus.
- The Non-Price Determinant of Supply:
- 2.The Price of Other Goods.
- Producers often have a
choice as to what they
are going to supply.
- example: A producer of roller skates
may be able to produce stake boards
with minimal change in facilities.
- If the price of the skateboards
rise, because there is more
demand for them, then it may be
that the producers will be
attracted by higher prices and
come to supply more
skateboards and fewer roller
skates.
- There is a movement along the supply
curve for skateboards.
- There will also be a fall in
supply for roller skates at all
prices
- And the supply will shift to the left , even though
the price has not changed there is a fall in supply.
- And the supply will shift to the left , even though
the price has not changed there is a fall in supply.
- There is a movement along the supply
curve for skateboards.
- If the price of the skateboards
rise, because there is more
demand for them, then it may be
that the producers will be
attracted by higher prices and
come to supply more
skateboards and fewer roller
skates.
- example: A producer of roller skates
may be able to produce stake boards
with minimal change in facilities.
- Producers often have a
choice as to what they
are going to supply.
- 1. Cost of
Factors of
Production.
- An increase price in wages
- Will lead to a
fewer supply at all prices
- It will shift the supply curve
to the left.
- It will shift the supply curve
to the left.
- Will lead to a
fewer supply at all prices
- An increase price in wages
- 3. State Of Technology.
- Improvements in tech
will increase in supply.
- Improves productivity.
- Productivity- os the amount
of output per unit of input.
- Productivity- os the amount
of output per unit of input.
- Lead to a shift to the right.
- Improves productivity.
- Improvements in tech
will increase in supply.
- 4. Government Intervention.
- Inderect Taxes
- Taxes on goods and services that are added to the price of a product.
- Increase in indirect tax will lead to increase the
cost of production.
- Increase in indirect tax will lead to increase the
cost of production.
- Shift the supply curve to move upwards by the amount of the indirect tax.
- Taxes on goods and services that are added to the price of a product.
- Governments inverse in the
markets in ways that alter the
supply.
- Regulations
- Applying a rules and regulations to protect
consumers or the workers.
- Extra cost to the firm
- eg. cigarettes and alcohol
- Extra cost to the firm
- Applying a rules and regulations to protect
consumers or the workers.
- Supply Shocks
- normal events that disrupt the supply of goods or services
- Positive
- Shift to the right.
- discover minerals in soil
- Shift to the right.
- Negative.
- Shift to the left
- Natural disasters
- Man-made environmental disaster
- Conflicts such as wars
- Shift to the left
- Positive
- normal events that disrupt the supply of goods or services
- Subsidies
- The government pays producer to make more of the good.
- Reduces the cost of production
- Shif supply curve to move downwards by the amount of subsidy.
- More will be supplied
- Reduces the cost of production
- The government pays producer to make more of the good.
- Inderect Taxes
- 2.The Price of Other Goods.
- Definition
- Production Possibilities
Curves/Production
Possibilities Frontier.
- 1. PPC shows the maximum
combinations of goods and
services that can be produced by
an economy in a given time
period.
- 2. Shows that there is a limit to
what a country can produce.
Scarcity of economic resources
limits output to points on or below
the PPC
- 2. Shows that there is a limit to
what a country can produce.
Scarcity of economic resources
limits output to points on or below
the PPC
- Shifts
- Left
- 1. Shows a decrease in its
productivity capacity.
- Caused by:
- War and natural disasters.
- War and natural disasters.
- Caused by:
- 1. Shows a decrease in its
productivity capacity.
- Right
- 1. Shows a country's
ability to produce more
goods and services.
- Caused by:
- Improvements in the
quality and quantity of
the factors of production.
- Reduce water to gain and
raise more land.
- Reduce water to gain and
raise more land.
- Improvements in the
quality and quantity of
the factors of production.
- Caused by:
- 1. Shows a country's
ability to produce more
goods and services.
- Economic Growth
- A rise in the productive potential.
- An increase in the output of goods and services
- An increase in the output of goods and services
- A rise in the productive potential.
- Left
- 1. PPC shows the maximum
combinations of goods and
services that can be produced by
an economy in a given time
period.
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