The Economic Problem and Economic Flows

Capital is man-made resources used to create further goods and services, including factories, machines, and human-made resources.

The problem of deciding how to satisfy unlimited wants with limited resources.

Government intervention refers to actions that affect economic activity, resource allocation, and market operations to achieve economic goals.

What to produce is determined by consumers, how much to produce is decided by entrepreneurs, how to produce is determined by businesses, governments, or tradition, and who receives the goods is based on wages, rent, and interest.

Scarcity refers to the insufficiency of resources relative to unlimited wants. It is a universal problem because resources are limited while wants are unlimited.

Ceteris paribus means 'other things being equal'. It helps in isolating the impact of changes in specific variables by assuming all other factors remain constant.

Opportunity cost is the best alternative forgone when a choice is made. For example, choosing to study economics over chemistry represents the opportunity cost of not studying chemistry.

Productivity is a measure of production efficiency, indicating the rate of output per unit of inputs. It is crucial for economic growth and resource utilization.

Economic growth is a sustained increase in an economy's productive capacity over time, leading to more goods and services. In Australia, it is often measured by GDP.

Allocative efficiency occurs when resources are allocated to produce the maximum benefits for consumers and the country. Consumer values influence the efficient allocation of resources.

Productive/technical efficiency occurs when a country's resources generate the maximum output possible. It is important in maximizing the production of goods and services at the lowest cost.

The factors of production are land, labour, capital, and enterprise. Land includes natural resources, labour is human effort, capital is man-made resources, and enterprise is the ability to manage production.

Capital as money refers to currency, while capital as a factor of production refers to man-made resources like factories and machines. For example, a factory is considered capital as a factor of production.

An entrepreneur is the innovator who supplies enterprise to the production process. They contribute to economic growth by organizing resources efficiently and creating new opportunities for production.

Economic indicators are variables that reflect the general course and level of economic activity, such as employment levels and inflation. They are crucial in providing insights into the health of an economy.

Government intervention refers to actions that affect economic activity and resource allocation. Examples include subsidies, tax rate changes, government expenditure adjustments, and regulation of foreign investment.