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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?
- 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?
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What is GDP?
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What are the 5 economic questions that need to be answered in economics?
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What is the difference between needs and wants in economics?
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Explain Maslow's hierarchy of needs and its relevance to economics.
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What is the main focus of macroeconomics and microeconomics?
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Why is the concept of scarcity important in economics?
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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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Description
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.
