Economics Study Sheet - Grade 10 PDF
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This document is an economics study sheet for grade 10. It covers the nature of economics, including definitions, branches, and key agents such as households, firms, and governments. The study sheet also includes concepts like scarcity, opportunity cost, and the economic questions of production. It provides a basic introduction to the study of economics.
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Economics Study Sheet - Grade 10 Nature of Economics Difference Between Economics and Economy Economics is a social science that studies the production, distribution and consumption of goods and services, and the allocation of scarce resources. An economy is the system by which goods an...
Economics Study Sheet - Grade 10 Nature of Economics Difference Between Economics and Economy Economics is a social science that studies the production, distribution and consumption of goods and services, and the allocation of scarce resources. An economy is the system by which goods and services are produced, distributed and consumed within a society. Branches of Economics Microeconomics: This branch focuses on individual and business decision-making processes. Macroeconomics: This branch focuses on economics as a whole, aiming to understand and address large-scale economic issues and policies. Main Economic Agents Households: Households are the basic units of consumption and labor. They supply factors of production (like labor) and demand goods and services. Firms: Firms produce goods and services for consumption. Government: Governments provide goods and services, and implement policies that impact the economy. Economic Concepts Scarcity: The fundamental economic problem of having seemingly unlimited human wants and needs in a world with limited resources. Scarcity occurs when the demand for a good or service is greater than the supply. Choice: The act or process of deciding what to produce, how to produce, and for whom. Opportunity cost: Opportunity cost is the value of the next best alternative that is forgone when a choice is made. Money Cost: The amount of money a company must allocate to produce goods and services. It is also calledexplicit cost. The Economic Question on Producing Goods and Services 1. What to produce? 2. How to produce? 3. For whom to produce? Difference Between Goods and Services Goodsare tangible products that can be seen, touchedand stored. They are physical items produced for sale or use.Servicesare intangible activities or benefits provided to consumers. Free Goods and Economic Goods Free goodsrefer to goods that are abundant and donot require the use of scarce resources to obtain.Economic goodsare goods thatare scarce and require the use of resources to produce. They have an opportunity cost because their production involves trade-off. Production Possibility Frontier (PPF) The Production Possibility Frontier (PPF) is a graphical representation that shows the maximum possible output combinations of two goods or services that an economy can produce given its resources and technology. The PPF is typically shown as a curve on a graph where: The x-axis represents the quantity of one good. The y-axis represents the quantity of another good. Concepts of the Production Possibility Frontier (PPF) The production possibility frontier/curve highlights concepts such as opportunity cost, efficiency, inefficiency, opportunity cost, attainable and unattainable. Efficiency: Efficiency refers to the optimal use of resources to achieve the best possible outcome with minimal waste, in terms of production and allocation. Inefficiency: Inefficiency refers to when resources are not being used to their fullest capacity, which results in wasted resources. Attainable: Unattainable: Causes of the Shifts of the Production Possibility Curve Improvement in labour productivity Technological advancement Improvement in education or skills Growth in the population Discovery of new natural resources Outward Shift VS Inward Shift in PPF An outward shift of the PPF represents economic growth, where more of both goods can be produced. An inward shift of the PPF represents a decrease in the economy’s productive capacity. Assumptions on the Illustration of the PPF 1. The economy produces only two goods. 2. The amount of resources is fixed. 3. Each good can be made using different amounts of production factors. Economic Decisions Economic decision refers to the process of making choices about how to use resources efficiently to achieve the best possible outcome. Factors Influencing the Economic Decisions of Households/Individuals (Consumers): Personal choice Size of income Bandwagon effect: When people increase their demand for a product or service because others are doing the same. Type of work Level of education Rate of interest Climate and weather conditions Factors Influencing the Economic Decisions of Firms: Costs of production Changing demand for products Factors Influencing the Economic Decisions of Governments Taxes on goods The influence of governments on businesses with laws and grants Factors of Production Difference Between Production and Productivity Productionrefers to the process of creating goodsand services by transforming inputs into outputs. It involves extracting raw materials, manufacturing, assembling, and distributing products to consumers. Productivitymeasures the efficiency of the production process. Definition of Factor of Production Factors of production are the resources required to produce goods and services within an economy. They are typically categorized into human and non-human resources. Importance of Factors of Production Helps in determining how resources are allocated within an economy. Contributes to economic growth Four Types of Factors of Production Land Land refers to all natural resources used in production. This includes physical land itself, as well as resources like minerals, forests, water, and oil. The types consists of agricultural, industrial and commercial land. Importance of Land: Provides raw materials and resources essential for production. Determines the location and type of economic activities. Features of Land: Has no cost of production Geographically immobile Fixed in supply Labour Labour refers to the physical or mental efforts exerted by human beings in the production of goods and services. Importance of Labour: Essential for performing tasks and operations in the production process. Contributes to innovation and efficiency through human creativity and problem-solving. Capital Capital is the physical or financial resources used to establish, operate, and grow a business. Types of Capital Physical Capital: Includes machinery, tools, equipment, buildings. Financial Capital: Money used to purchase physical capital. Importance of Capital Increases the efficiency and scale of production. Facilitates technological advancements and productivity improvements. Entrepreneurship Entrepreneurship is the process or ability to establish, manage and grow a business to achieve profit. Rewards of Factors of Production Land = Rent Labour = Wages Capital = Interest Entrepreneurship = Profit Difference Between Salary and Wages Salary is the money made monthly, while wages is the money made fortnightly. The Economic Systems There are four (4) types of economic systems. They include: Free market/capitalist Command/planned/socialist Traditional/subsistence Mixed Free Market/Capitalist Acapitalistorfree market economyis an economicsystem where the production and distribution of goods and services are owned by private individuals, households or businesses rather than the government. In this system, supply and demand determine prices, and competition encourages innovation and efficiency. Eg. Singapore, United States Command/Planned/Socialist Economy Acommand,planned, orsocialisteconomy is an economicsystem where the government or central authority makes most of the decisions regarding the production, distribution, and pricing of goods and services. Eg. Cuba, North Korea Traditional/Subsistence Economy Atraditionalorsubsistenceeconomy is an economicsystem where people produce goods and services primarily for their own consumption, rather than for trade or profit. This system relies on farming, hunting, and gathering, with little to no surplus production. As a result, it is also sometimes called aBarter Economy. Eg. Isolated tribes of Asia, Africa and South America Mixed Economy Amixed economyis an economic system where both privateindividuals and the government allocate resources and play a role in economic decision-making. It combines features of both capitalism (free market) and socialism (government control and intervention). Eg. Barbados, Jamaica, Dominica (and all Caribbean countries). Concept of a Market Amarketis a system where the process of buying and selling takes place. The elements include buyers, sellers, goods and services. Definition of ‘Resource Allocation’ Resource allocation is the process of assigning scarce resources of an economy to produce different goods and services to meet the needs and wants of society. Difference Between Merit and Demerit Goods Merit Goods: Goods that are beneficial to society. Eg. education and healthcare. Demerit Goods: Goods that are harmful to society. Eg. Cigarettes and alcohol. Definition of Barter Barter is defined as a system of exchange where goods and services are traded directly without using money. Costs in the Short Run and Long Run Important Concepts Cost of Production:The sum of payments for all thefactors used to produce goods and services. Short Run:The period of time when it is not possibleto vary the quantities of all the factors of production used in the production process, where at least one factor of production remains fixed. Long Run:The period of time when all factors of productionin the production process are variable. Variable Factor:The amount of which can be variedin the short run. Fixed Factor:The amount of which it is not possible to vary in the short run. Difference of Factors in the Short and Long Run In the short run, land and capital are generally considered fixed factors. In the long run, all factors of production are variable. Difference between TVC, TFC and TC Total Variable Cost (TVC):The total cost of productionthat changes with the level of output. Total Fixed Cost (TFC):The total cost of productionthat remains constant regardless of the level of output. Total Cost (TC):The sum of total fixed costs andtotal variable costs incurred in producing a given level of output.
