Economics

lilaalex
Mind Map by lilaalex, updated more than 1 year ago
lilaalex
Created by lilaalex over 6 years ago
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IB Economics- HL Mind Map on Economics, created by lilaalex on 09/23/2014.

Resource summary

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