Economics Topic 1 Essay

Introduction to Economics: Economic growth | Increase in quantity of goods and services | Opportunity cost“Real cost” | Alternative use of resources. Represents the cost of satisfying one want over an alternative want. aka. Economics cost. | Resources “Factors of Production” | Used in the production of goods and servicesLand, Labour, Capital, Enterprise | Production possibility frontier | Describes the inputs that are used in the production of goods or services in the attempt to make an economic profit. Input decides the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called as "Production Function". | Productivity | How much output they can produce per factor of production per unit of time | Consumer G/S | Items produced for immediate satisfaction of individual and community needs and wants. | Capital G/S | Produced not for immediate consumption but for the production of other goods. | Revenue | The amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. It is the "top line" or "gross income" figure from which costs are subtracted to determine net income. | Gross Domestic Product | Total market value of all final G/S produced in an economy for a period of time. | Business cycle | Fluctuations in the level of economics growth due to domestic of international labours. | Recession | Stage of the business cycle where there is decreasing economic activityDefined as 2 consecutive quarters (6 months) of negative economic growth (i.e. fall in GDP) | Leakages | Items that remove money from the circular flow of income, decreasing aggregate income and the general level of economic activity.Savings (S) taxation (T) and imports (M) | Injections | Flows of money that increase aggregate income and the general level of economic activity. Investment (I) government spending (G) exports (X) | Equilibrium | When the total sum of leakages equal the total sum of injections | Price mechanism | Process by which the forces of supply and demand interact to determine the market price at which the G/S are sold, and the quantity produced. | Factor market | Market for any input into the production process including land, labour, capital and enterprise. | Competition | Pressure in business firms in a market economy to lower prices or improve the quality of output to increase their sales of G/S to consumers. | Mixed economy | Economic system where the decisions concerning production and distribution are made by a combination of market forces and government decisions. | Merit goods | G/S that are not produced in sufficient quantity by the private sector because individuals do not place sufficient value on them. | Human development index | Measure of economic development by the Unites Nations of Development Program. It takes in to account life expectancy at bitch, levels of educational attainment and material living standard (as measured by the GDP per capita) |

Nature of Economics:
✘The economic problem: UNLIMITED WANTS, LIMITED RECOURCES.
The economic problem emerges because our desire to consume goods and services is greater than our ability to produce.
Wants/demands:
The demand for goods and services arises from human wants. * Biological wants are for the goods and services needed to sustain human life. These are food, shelter, and clothing. These goods are often called "necessities". * Cultural wants for are for goods and services beyond necessities in order to maintain the socially accepted standard of living. The idea of a standard of living will vary with time and place. These goods and services are called "conveniences". * Demonstration wants are for goods and services beyond conveniences. Thanks to modern telecommunications, we all know about the

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