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Summary Topic 1.1-1.2 Notes
- Institution
- PEARSON (PEARSON)
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science1.1.1. Economics as a social
Thinking
like an economist
·
↳
they make assumptions to help models
them create and simplify
theiranalysis
↳e.g. the PPFshows theirmaximum productivity, opportunity costs and efficiency
use of caters paribus
·
in all things remain them
equal thus allowing to gocus the particular changes in the
on
economy
take place
thatwill as a resultpolicy changes
↳
other determinants may be included as evaluation
to
the analysis
helps simplify for the economist
Inability in economics to make scientific experiments
·
↳is economists use
simplified models
↳ to
easier justify
changes the
within economy
1.1.2. Positive and Normative statements
between
Distinction positive and normative statements
·
↳ Positive
economic statements is and therefore cannot
NOT an opinion be contested
↳
economic statements is
Normative an opinion rather than a factand may be dispusted
·
Role of value judgements in economic decision
influencing making
and policy
↳ Value judgements isa decision made based
thatis on a person's values and (e.g Government]
opinion
some people may have a more classical hands of approach or some may have a keynes hands on
↳ Overall, economic decisions made by individuals and policy decisions made by governments will
be based upon their
value judgements (normative)
, 1.1.3. The Economic Problem
·
The Problem of scarcity
In cannot
resources are scarce, however wants are unlimited, not
a ll wants be satisfied
I
decisions are madewhatfor, now and whom the goods services are for.
↳Economics as the study of allocation of resources
↳
those who have money an goods and
afford the limited services
The distinction
between renewable and non-renewable resource
Renewable those thata re replaced the same orfaster than they consumed
being
Non-renewable those thatare consumed replaced by natural
faster than they're being means
↳ a more
populous area consume more resources, the mostfully
will exploitand mastage
minimise
·
The importance of opportunity costs to economic
agents (consumers, producers, gov.)
opportunity cost-costof alternative
the next best
forgone
↳n
government opp. costwhen they are
allocating resources
their healthcare, edu, defense etc.)
they all have impacts on the labour force
↳o rational try to make the decisions which have the tourest
consumers will opportunity cost
, 1.1.4 -
Production possibility frontiers
Capital one of the factors of uses oppTs to depict:
production, goodsused in the maximum productive posential of an a combination
economy, using of two goods or services, when resources
the process
production are fully and
efficiently employed
capital goods good produced in they show the
opportunity cost of scarce resources
order to aid of
products our A
B -most efficientcombinations of output
consumer goods * B has the
opportunity cost of producing
more cheese
·
100
E
consumer goods goods bought and
-
D
inefficient, and used to
the resources are not full productive
50 B
demanded by households C =- not
yetattainable with
the surrent resources
D
and individuals Law returns says that
of diminishing as resources
additional are devoted to a good, the
producing
marginal
increase in
output become
will smaller and smatter
40 98 outputo f
yoghu
opp. cost so units dyoghun
PPC can only indicate
economic growth or decline.
under and
-Only production on the PPF
isattainable
·
only production
on the PPF uses resources efficiently
consumer
goods
economic growth pointB:outward shiftproductive potential
·
B growth:inward
decline shift
ASSUMPTIONS:fixed amountof resources used
X
a
there constant state
C
is
of technology
capital
goods
Distinction of capital Goods and consumer goods
Capital Goods goods which can be used to produce other goods
is
crane, factory, pizza oven
consumer goods goodswhich cannotbe used to produce other goods
in
smartphone, pizza, food, clothing
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