Economics 

The study of scarcity.

- the study in which a society decides how to use its scarce resources to satisfy unlimited wants. 

Wants and Needs

wants - accessories 

e.g - handbag

needs - essentials

e.g - food, water and shelter

Complementary Wants

wants that complement one another

e.g - car and fuel 

Competitive Wants

good or services that can be substituted 

eg - butter and margarine 

Recurrent Wants

wants that are never satisfied and keep reoccuring 

eg - food

Opportunity Cost

a choice must be made because wants are infinite and resources to satisfy those wants are finite 

Factors of Production 

land - everything to do with nature

labour - all physical and interlectual work by humans

capital - any man-made instrument of production

eg - a needle is used to make a jumper

enterprise - either a business owner or a manager who combines all three FOP's to produce a commodity

Consumer Sovereignty

the consumer, the king or queen of the market place who decides on the economic problem

- what to produce?

- how to produce?

- for whom to produce?

- how much to produce?

Cost - benefit Analysis

graph designed to weigh up the pro's and con's in order to make an economic decision 

The Law of Demand 

the quantity demanded of a good or service is inverse to the price of that good or service

The Law of Supply

the quantity supplied of a good or service varies positively with the price of a good or service

Eqilibrium

the equilibrium price is established when there is a 'right price' which is just high enough for sellers and just low enough for buyers.

Elasticity

measures the responsiveness in changes of demand

Elastic

commodity < 1

the percentage change in quantity demanded exceeds the percentage change in price 

10% increase in $ = 20% decrease in demand

Inelastic

the percentage change in quantity demanded is less than the percentage change in price

10% increase in $ = 5% decrease in demand

Unitelastic

the percentage change in price is equal to the percentage change in demand 

10% increase in $ = 10% decrease in demand

Price Ceiling 

the maximum price fixed by the government

eg - rent control: highest rent for a buliding set by the governmet at $200/week. 

Price Floor

the absolute minimal price fixed by the goverment 

Collective Wants 

occurs when a group of people all want the same rescource

eg - economics class all wanting an economics book

Intervention in the Price Mechanism 

Subsides- gov services which private enterprise doesn't want to pay for ( public transport- doesn't turn a profit

Deregulation

The Government reduces the level of intervention in the market place

eg - telstra, Qantas, hospitals, prisons

Price Mechanism 

the system or process by which price changes bring about equality between supply and demand

Propensity 

term used to described a persons tendancy or desire to act in a certain way 

Utility

satisfaction gained by the purchase of a commodity  

Leakages 

income that leaves the circular flow- outflow if expenditure

eg - savings, income tax, imports

Injections  

investment expenditure ( company building factory) gov. expenditure ( hospitals and exports)

C + I + G + X - M

Consumptions+Income+Government+Exports- Imports

Factors determining Demand

- price of a commodity

- buyers income

- buyers tastes

- population change

- buyers expectations for the future

Disposable Income

Part of the income that is subject to change or removal eg - travel, food, clothing

Factors determining Supply

- $ of a commodity

- $ of production

- technology used in production

Intervention with the Price Mechanism 

successful commodity launched into the market place eg - suppliers take advantage of the MP iphone- Samsung copy

Monopoly 

1 producer/supplier dominating the market 

Duopoly

two producers/ suppliers dominating the market

eg - (coles and woolworths) opposite of perfect competition