Economics Notes
Economics Notes 2011-2012
Contents
SECTION 1 – MICROECONOMICS
Chapter 1 : page 2
Chapter 2 : page 6
Chapter 3 : page 10
Chapter 4 : page
Chapter 5 : page 11
Chapter 6 : page
Chapter 7 : page
Chapter 8 : page
Chapter 9 : page
Chapter 10 : page
Chapter 11 : page
Chapter 12 : page
SECTION 1 – MICROECONOMICS
1. The foundations of economics
Economics – Social science, a study of people in society and how they interact with each other. A study of rationing systems, the study of how scarce resources are allocated to fulfill the infinite wants of consumers.
Scarcity, Choice, Opportunity cost
Economic good – Any good or service that has a price, and is thus being rationed.
Opportunity cost – The next best alternative foregone when an economic decision is made (what you give up in order to have something else). Opportunity cost never expressed in monetary terms – it is what you go without. Good/service must be relatively scarce, so it will have a price and be classified as an “economic good”.
Free goods – Not relatively scarce and so will not have a price, are infinite, do not have an opportunity cost when consumed (air, salt water).
Basic economic problem
¤ What should be produced and in what quantities?
¤ How should things be produced?
¤ Who should things be produced for?
Factors of production – Land, labour, capital, management (entrepreneurship)
Capital – Comes from investment in physical and human capital. These have been accumulated through investment, usually by the government.
Physical capital – The stock of manufactured resources (factories, machinery, roads, tools) that are used to produce goods and services in the economy.
Human capital – The value of the workforce (education, health care)
Infrastructure – Social overhead capital. The large-scale public systems, services, and facilities of a country used for economic activity. It includes stock of a nation’s roads, railways, telecommunications, etc. Improved
Contents
SECTION 1 – MICROECONOMICS
Chapter 1 : page 2
Chapter 2 : page 6
Chapter 3 : page 10
Chapter 4 : page
Chapter 5 : page 11
Chapter 6 : page
Chapter 7 : page
Chapter 8 : page
Chapter 9 : page
Chapter 10 : page
Chapter 11 : page
Chapter 12 : page
SECTION 1 – MICROECONOMICS
1. The foundations of economics
Economics – Social science, a study of people in society and how they interact with each other. A study of rationing systems, the study of how scarce resources are allocated to fulfill the infinite wants of consumers.
Scarcity, Choice, Opportunity cost
Economic good – Any good or service that has a price, and is thus being rationed.
Opportunity cost – The next best alternative foregone when an economic decision is made (what you give up in order to have something else). Opportunity cost never expressed in monetary terms – it is what you go without. Good/service must be relatively scarce, so it will have a price and be classified as an “economic good”.
Free goods – Not relatively scarce and so will not have a price, are infinite, do not have an opportunity cost when consumed (air, salt water).
Basic economic problem
¤ What should be produced and in what quantities?
¤ How should things be produced?
¤ Who should things be produced for?
Factors of production – Land, labour, capital, management (entrepreneurship)
Capital – Comes from investment in physical and human capital. These have been accumulated through investment, usually by the government.
Physical capital – The stock of manufactured resources (factories, machinery, roads, tools) that are used to produce goods and services in the economy.
Human capital – The value of the workforce (education, health care)
Infrastructure – Social overhead capital. The large-scale public systems, services, and facilities of a country used for economic activity. It includes stock of a nation’s roads, railways, telecommunications, etc. Improved