12u Economics Unit 1 Review
Economics Unit 1 Review
Economics – the study of how to distribute scarce resources among competing ends Microeconomics – focuses on individual consumers and businesses Macroeconomics – takes a broad view of the economy
3 Basic questions any society must answer * What to produce * How to produce * For whom to produce
Economists assume that economic decision makers maximize their own utility. Utility is the satisfaction or pleasure from any action. Economists assume the self-interest motive: that you are primarily concerned with your own welfare; e.g. picking lunches of the same price. Opportunity cost is the utility of the best forgone alternative; e.g. * The opportunity cost of partying all night is a good night’s sleep * The opportunity cost of producing 1 computer is 10 cameras
The production possibilities model is based on 3 assumptions: * An economy makes only 2 products * Resources and technology are fixed * All resources are employed to their fullest capacity
The production possibilities curve shoes a range of possible output combinations for an economy. It highlights the scarcity of resources. It has a concave shape which reflects the law of increasing opportunity costs (resources don’t transfer perfectly from one use to another)
Traditional economies – focus on non-economic concerns but have tight social constraints
Market economies – consumer centered and innovative but create inequality and instability
Command economies – equalize incomes but have a lack of freedom
Most countries have mixed economies; * Modern mixed economies include both public and private sectors * Traditional mixed economies combine traditional sectors with public and/or private sectors
There are major economic goals for a typical country: * Economic efficiency * Income equity * Price stability * Full employment * Viable balance of payment * Economic growth * Environmental
Economics – the study of how to distribute scarce resources among competing ends Microeconomics – focuses on individual consumers and businesses Macroeconomics – takes a broad view of the economy
3 Basic questions any society must answer * What to produce * How to produce * For whom to produce
Economists assume that economic decision makers maximize their own utility. Utility is the satisfaction or pleasure from any action. Economists assume the self-interest motive: that you are primarily concerned with your own welfare; e.g. picking lunches of the same price. Opportunity cost is the utility of the best forgone alternative; e.g. * The opportunity cost of partying all night is a good night’s sleep * The opportunity cost of producing 1 computer is 10 cameras
The production possibilities model is based on 3 assumptions: * An economy makes only 2 products * Resources and technology are fixed * All resources are employed to their fullest capacity
The production possibilities curve shoes a range of possible output combinations for an economy. It highlights the scarcity of resources. It has a concave shape which reflects the law of increasing opportunity costs (resources don’t transfer perfectly from one use to another)
Traditional economies – focus on non-economic concerns but have tight social constraints
Market economies – consumer centered and innovative but create inequality and instability
Command economies – equalize incomes but have a lack of freedom
Most countries have mixed economies; * Modern mixed economies include both public and private sectors * Traditional mixed economies combine traditional sectors with public and/or private sectors
There are major economic goals for a typical country: * Economic efficiency * Income equity * Price stability * Full employment * Viable balance of payment * Economic growth * Environmental