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Economics Chapter 1 - Coggle Diagram
Economics Chapter 1
scarcity, choice and opportunity
scarcity is the problem arising from limited resources and unlimited wants. That is, the excess of human wants over what can actually be produced with limited resources to fulfil these wants.
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Wants refer to all goods and services people would consume if they has unlimited incomes.
Resources are inputs used to produce goods and services
Resources
Land
includes plot of land, natural resources, supplied by nature such as forests, rivers and minerals->can be renewable or non-renewable and reclaimed land made up of clay mixture is not supplied by nature
Labour
Physical and mental effort, in producing goods and services and more effective through education, training
Capital
Not money, resource used to further production of goods and services and examples of this is machines, building, tools and reclaimed land
Entrepreneurship
Human resource, not labor, refers to managerial ability that involves organization of factors of production, rewarded for taking risks related to production of goods and services
Economics
positive economics
A statement that in principle, is capable of being refuted by reference to evidence( An increase in household incomes will lead to an increase in the demand for luxury goods.
Normative economics
Look at the outcomes of economic behavior and question whether they are good or bad.
A statement of value or subjective opinion that cannot be proved or disproved by an appeal to facts.
opportunity
opportunity cost is the value of the next best alternative forgone when a choice is made( Thus scarcity necessitates choice and choice involves opportunity cost)
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Concepts of Efficiency
Economic Efficiency: A situation where each good is produced at the minimum cost and where individual people and firms get the maximum benefit from their resources.
Productive Efficiency: 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.
Allocative Efficiency: achieved when the current combination of goods and services produced and consumed allows the society to attain the greatest level of satisfaction.