Lecture 1
- Created by: Georgiapettman
- Created on: 01-02-18 10:23
View mindmap
- Lecture 1
- SCARCITY - inability to satisfy all our wants (unlimited wants)
- Because we face scarcity we must make a choice
- The Main Economic Problem - WHAT, HOW and WHOM to produce for.
- WHAT ?
- What do we produce?
- Changes over time as technology allows us to produce more.
- Today, most people in rich countries produce services.
- WHOM ?
- LAND = RENT
- LABOUR = WAGES
- CAPITAL = INTEREST
- ENTREPENEURSHIP = PROFIT
- WHAT ?
- When do choices made in pursuit of self interest also promote social interest?
- Incentive - a reward that encourages an action or penalty that discourages an action
- MICRO - choices individuals and businesses make the way those choices interact with market forces and the influence of Gvts.
- Factors of Production (FOP) -
- LAND - gifts of nature used to produce products
- LABOUR - work time & effort people devote to producing products
- HUMAN CAPITAL - impacts quality of labour which is the knowledge and skill obtained from education, on the job traaining and experience
- CAPITAL - tools, instruments machines and buildings used for production
- ENTREPRENEURSHIP- organises land, labour & capital
- MACRO - study of the national and global economies.
- KEY IDEAS :
- A choice is a trade - off
- People make rational choices by comparing benefits and costs.
- Benefit is what you gain from something
- Cost is what you must give up for something (opportunity cost)
- Choices respond to incentives
- SCARCITY - inability to satisfy all our wants (unlimited wants)
- HOW ?
Comments
No comments have yet been made