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Chapter 1 - Coggle Diagram
Chapter 1
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resources
land
productive resources provided by nature eg. rivers, trees, minerals
labour
human effort directed to production of goods and services, made more productive through education and training
capital
man-made resource used in the production of other goods and services rather than being consumed for their own sake eg. machines, buildings, factories, tools
entrepreneurship
managerial ability that involves the organising of factors of production, rewards in the form of profits by taking risks related to production of goods and services, every business organisation exists due to it
what is economics?
study of the allocation of scarce resources to the production of goods and services used to satisfy consumers' unlimited wants
scarcity is the problem arising from limited resources and unlimited wants, it is the excess of human wants over what can actually be produced with limited resources to fulfill these wants
normative economics
a look at the outcome of economic behaviour and questions whether they are good or bad, based on opinions and not facts
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scarcity, choice and resource allocation
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concepts of efficiency
economic efficiency is a situation where each good is produced at the minimum cost and where individual people and firms get the maximum benefit and their resources
productive efficiency
productive efficiency is achieved when the firms in an economy are producing the maximum output for the given amount of inputs, or producing a given output with the least cost combination of inputs
achieved by an economy when all available resources are fully employed to achieve the maximum output possible
allocative efficiency
allocative efficiency is achieved when the current combination of goods and services produced and consumed allows the society to attain the greatest level of satisfaction
achieved by an economy when the value consumers place on a good equals the cost of the resources used up in production of that unit of good
if price consumers are willing to pay is greater than the marginal cost of producing an additional unit, social welfare will increase with the production of the additional unit
if consumers are only willing to pay less than the marginal cost of producing an additional unit of the good, it means too many resources have been allocated to that good and society's welfare will increase by reducing the output of that good