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Unit 1- The Nature of Economics and the Economy (Influential People of…
Unit 1- The Nature of
Economics and the
Economy
Chapter1- Basic Principles of
Economics
Economics
:star:
Allocate of scarce resources
Satisfy unlimited wants
Make decision
Fallacy
:star:
has been proved false
Post Hoc Fallacy
“Cause and event”
False cause
Fallacy of Composition
A mistaken belief
Good for everyone
Fallacy of single causation
A mistaken belief
One cause rather than several
A hypothesis
Opportunity Cost
:star:
Choose X, Loose Y
"Real" cost not the price.
Next best alternatives
Facts and Values
:star:
Analytical(Positive) Economics
Statements which can be tested
right or wrong
Facts based
Normative(policy) Economics
Valued based
Cannot be proved or disproved
Production Possibilities
:star:
Law of increasing returns to scale
inputs are increased
equal percentage increased
no inputs are constant
Law of increasing relative cost
produce with the same resources
cost of additional units increases
Law of diminishing returns
decrease in the per unit output
Social Science
:star:
Science
Human Behaviour
History/Geography/Sociology/Anthropology
Chapter 2 - Productive Resources and Economis Systems
Productive Resources
:red_flag:
Land :star:
nature/ water/ fish/ minerals
Labour :star:
People to produce good & services
Capital :star:
Human capital
the
skills
and
knowledge
gained
Physical capital
factories & equipment used in production
Tangible resources :star:
Physical Assets
Visible
Intangible resources :star:
Nonphysical
Not visible
Entrepreneurship :star:
the component of human resources
raising capital/ organizing/ managing/ assembling
Environment for enterprise
Values in the same manner
Social Values
neither producing waste
nor consuming unsustainable resources
Political Economics :red_flag:
Communism :fire:
Production are owned by the state
Ownership: government & community
Karl Marx
Author of Communist Manifesto
Father of Communism
Nationalization :fire:
State ownership
charged with operating (public interest)
Business Enterpise
Socialism :fire:
High taxes
Education and health
promote a large middle class
Capitalism :fire:
private property and free enterprise
based on competition
profit motive & increasing ones wealth
Laissez Faire capitalism :fire:
Separation of economy and state
Government leaves people's economic decisions alone
Fascism :fire:
Right -wing
controlling investments and industries
Free-market
international trade is usually abolished
Systems
Command Economy
central authority is in command
a centrally planned economy
government has final say
For example : North Korea
agriculture, are left to be run by the people.
no shortage of jobs
Tradition Economy
relies on habit, custom, or ritual
decisions made by family and group
Advantages
societies are more satisfied
Market Economy
voluntary exchange in markets
decisions made by buyers and sellers
For example : Japan
Economic Systems
A method
Make a better nation
satisfy people's needs
produce/distribute goods and servies
Influential People of Economics :silhouette:
Adam Smith :silhouette:
Theory: Market although imperfect best left untouched
Scottish Economist Capitalism
First Comprehensive system of Political Economy
Karl Marx :silhouette:
Father of communism
Wealth to few = Masses are poor
Capitalism holds its own downfall
Thomas Malthus :silhouette:
Depicted
Starvation
due to
Over Population
David Ricardo's :silhouette:
Economies move towards a stand still
Profits rise = Expenses Rise = Profits Decrease = Expenses Decrease
John Keynes :silhouette:
Spending is the key to employment
Founder of Macroecononmics
John Kenneth Galbraith :silhouette:
Canadian Born Economist
Post- Keynsian Economics
Milton Friedman :silhouette:
Individual's spend based off income
Free Market
Chapter 4 Demand and Supply
:explode:
Changes in Demand :explode:
Tastes and Preferences
Individual's tastes determine demand for a good
Substitutes
More Substitutes = Less Demand
Populations
More Population = More Demand
Expectations
Expect Higher Prices = Consumers Buy More Today
Expect Lower Prices = Consumers Wait to Buy
Income
More = Less Demand for Inferior Goods, Vise Versa
More Income = More Demand for Normal Goods, Vise Versa
Changes In Supply :explode:
The Number of Sellers
Less Sellers = Less Supply, Vise Versa
Cost to produce
High Prices = More Supply, Vise Versa
Technology
Cheaper Production = More Supply
Nature
Example: Drought = Less Supply
Price Related
Cheaper to make = More Supply, Vise Versa
Equilibrium Price :explode:
Price at which goods supplied equals goods demanded
The Market :explode:
Law of Demand :explode:
Increase in Price = Decrease in Demand, Vise Versa
Supply :explode:
Total Available amount of a good/service
Demand :explode:
Desire/Willingness to pay for a good
Law of Supply :explode:
Increase in Price = Increase of Supply, Vise versa
Direct Relationship between Price & Supply
Market :explode:
Prices are set by individual consumer spending
Little government intervention
