10 Questions
What is the opportunity cost?
The cost of the next best alternative
What are the 4 factors of production?
- 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?
Capital goods are used to make other goods, while consumer goods are final products purchased directly by consumers.
What is GDP?
Gross Domestic Product
What are the 5 economic questions that need to be answered in economics?
- 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?
What is the difference between needs and wants in economics?
Needs are things we must have to survive, while wants are things we would really like to have.
Explain Maslow's hierarchy of needs and its relevance to economics.
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.
What is the main focus of macroeconomics and microeconomics?
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.
Why is the concept of scarcity important in economics?
Scarcity refers to limited resources, which forces individuals and societies to make decisions about how to allocate these resources to fulfill wants and needs.
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.
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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