Unit 2 – The Birth of Capitalism Part 1: What is Economics?
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Questions and Answers

What is the opportunity cost?

The cost of the next best alternative

What are the 4 factors of production?

  1. Land - natural resources, 2. Labour - physical, intellectual, 3. Capital - tools, machinery, factories, 4. Entrepreneurship - investment, money

What is the reward for land in the factors of production?

Rent

What is the difference between capital goods and consumer goods?

<p>Capital goods are used to make other goods, while consumer goods are final products purchased directly by consumers.</p> Signup and view all the answers

What is GDP?

<p>Gross Domestic Product</p> Signup and view all the answers

What are the 5 economic questions that need to be answered in economics?

<ol> <li>What to produce (make) 2. How much to produce (quantity) 3. How to produce it? 4. For whom to produce it? 5. Who gets to make the decisions?</li> </ol> Signup and view all the answers

What is the difference between needs and wants in economics?

<p>Needs are things we must have to survive, while wants are things we would really like to have.</p> Signup and view all the answers

Explain Maslow's hierarchy of needs and its relevance to economics.

<p>Maslow's hierarchy of needs is a pyramid representing the difference between what we need and what we want. It is divided into 5 levels: physiological, safety, love and belonging, esteem, and self-actualization.</p> Signup and view all the answers

What is the main focus of macroeconomics and microeconomics?

<p>Macroeconomics focuses on the big picture and choices made by large groups, while microeconomics focuses on the smaller picture and how individuals make economic decisions.</p> Signup and view all the answers

Why is the concept of scarcity important in economics?

<p>Scarcity refers to limited resources, which forces individuals and societies to make decisions about how to allocate these resources to fulfill wants and needs.</p> Signup and view all the answers

Study Notes

What is Economics?

  • Economics is the study of how individuals and societies make decisions about using scarce resources to fulfill wants and needs.
  • Scarcity refers to limited resources.

Macroeconomics vs. Microeconomics

  • Macroeconomics: the big picture, focusing on choices made by large groups.
  • Microeconomics: the smaller picture, focusing on how individuals make economic decisions.

5 Economic Questions

  • What to produce?
  • How much to produce?
  • How to produce it?
  • For whom to produce it?
  • Who gets to make the decisions?

Needs and Wants

  • Needs: essential things required for survival, such as food, water, and shelter.
  • Wants: desirable things that are not necessary for survival, such as luxury items.
  • Maslow's hierarchy of needs:
    • Physiological: basic needs like food and water.
    • Safety: security and health.
    • Love and belonging: relationships and social connections.
    • Esteem: self-esteem and recognition.
    • Self-actualization: personal growth and fulfillment.

Trade vs. Opportunity Cost

  • Trade-off: choosing one option over others.
  • Opportunity Cost: the cost of the next best alternative.
  • Decision making plays an important role in the economy.

Factors of Production

  • 4 factors of production:
    • Land: natural resources.
    • Labour: physical and intellectual work.
    • Capital: tools, machinery, and factories.
    • Entrepreneurship: investment, management, and risk-taking.

Rewards for Factors of Production

  • Rent: reward for land.
  • Wages, salaries, and benefits: reward for labour.
  • Profit: reward for entrepreneurship.
  • Interest: reward for capital.
  • Income: total reward for all factors of production.

Mobility of Labour

  • Geographic mobility: ability to work in a particular location.
  • Occupational mobility: ability to change job types.
  • Factors affecting mobility: family ties, costs of living, and lower wage rates.

Parts of the Production Process

  • Factors of production: inputs needed to make goods and services.
  • Producers: companies that make and deliver goods and services.
  • Consumers: people who buy the products.
  • Chain of production:
    • Manufacturer to wholesaler to retailer to consumer.
    • Manufacturer to retailer to consumer.
    • Manufacturer to consumer.

Changes in Production

  • The basic economic problem: unlimited human wants vs. scarce resources.
  • Capital goods: used to make other goods.
  • Consumer goods: final products purchased directly by consumers.
  • Specialization: dividing up production for efficiency.
  • Division of labour: different people performing different jobs.
  • Consumption: how much is bought and consumed.
  • Increase and decrease in production: affected by changes in land, labour, and capital.
  • GDP: measure of a country's total production in one year.

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Test your knowledge on the fundamentals of economics, including scarcity, macroeconomics, microeconomics, and the 5 economic questions that guide decision-making. Explore the study of how individuals and societies allocate scarce resources to fulfill wants and needs.

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