ECONOMICS

Definition

• "The science of how individual and societies deal with the fact that want's are greater than limited resources available."

The 4 Resources

• Land
• Labour
• Capital
• Entrepreneurship

Key concept

• Scarcity
• Opportunity cost
• Unintended effect
• Exchange/trade

Scarcity

• The need of choice
• The need for rationing device
• Competition
• E.g. selection of players in sport.

Opportunity cost

• The most highly valued opportunity or alternative forfeited when a choice is made.

Unintended effects

• A positive or negative outcome that was not anticipated.

Exchange/trade

• The process of giving up one thing for another.

Economics categories

• positive/normative economics
• microeconomics/ macroeconomics

Production Probability Frontier

• Straight Line
• Concave PPF

Straight Line

• Constant opportunity cost
• e.g. In sport, increase performance, increase value of the player. Vice versa.

Concave PPF

• Increasing opportunity cost
• e.g. Increase the salary, decrease the number of staff

Attainable

• Consists of the points on PPF curve and all points below PPF curve.

Unattainable

• Consists of the points above and beyond the PPF.
• e.g. A state football club is unable to buy a first division football player.

Productive efficiency

• The condition where the maximum output is produced with given resources and technology.

Productive inefficiency

• The condition where less than the maximum output is produced.