BSNS113 STUDY GUIDE | 2025/2026
Scarcity Not enough to satisfy everyone at zero price
1. What to produce?
Three basic questions that
every economic system 2. How to produce it?
answers? 3. For whom to produce?
Positive economics When we describe and explain how an aspect of the
economy works
When we make a statement about how things ought to
Normative economics
change (economists usually asked to do this in the
context of public policy making)
The effects of market forces. E.g. Competition among
What do economists model?
businesses, the efforts of consumers to get the most
from their budgets.
▪ Useful simplifications of complex phenomenon.
▪ Useful simplifications of reality
Economists build graphical
and algebraic models as ▪ Real world outcomes can have complex
they are... causes, we can investigation something complex
by breaking it into simpler parts and then work to
understand each part.
▪ Helps us explain interesting phenomena
The systems 'societies' use, to allocate scarce
, resources, to the production of goods and services,
What do economists study? and to distribute these goods and services to
consumers.
I.e. How societies manage the use of scarce resources.
Early economists observed that people seem intent
Economic rationality
to set up systems that work 'efficiently' i.e. they
yield the greatest net benefit.
, ▪ Traditional - follow in the family business, traditional
practices in the home...
▪ Command (or planned)
Our 'system' is a mix of ◦ Authoritarian - owner/manager of a business or household
several systems, what are
◦ Bureaucratic - large companies, local councils,
they?
central government (large complex organism)
▪ Market
◦ Farmers' market, supermarkets, George St, Trade-me
▪ Adam Smith
Important historic economists ▪ David Ricardo
▪ Robert Malthus
A graph that shows the various combinations of
Production Possibilities output that the economy can possibly produce
Frontier (PPF) given the available factors of production and
the available production technology.
Fixed:
▪ A fixed level of production technology
Aspects of the production ▪ A fixed amount of 'plant and equipment'
process
All other aspects (i.e. inputs) are variable
▪ Natural resources (N) - land, air, sunshine, minerals etc.
Resources (A.K.A Factors of ▪ Human resources (L) - Labour
Production, Inputs) ▪ Produced resources (K) - aka 'capital' - machinery,
expertise, intermediate inputs e.g. car paint and body
Scarcity Not enough to satisfy everyone at zero price
1. What to produce?
Three basic questions that
every economic system 2. How to produce it?
answers? 3. For whom to produce?
Positive economics When we describe and explain how an aspect of the
economy works
When we make a statement about how things ought to
Normative economics
change (economists usually asked to do this in the
context of public policy making)
The effects of market forces. E.g. Competition among
What do economists model?
businesses, the efforts of consumers to get the most
from their budgets.
▪ Useful simplifications of complex phenomenon.
▪ Useful simplifications of reality
Economists build graphical
and algebraic models as ▪ Real world outcomes can have complex
they are... causes, we can investigation something complex
by breaking it into simpler parts and then work to
understand each part.
▪ Helps us explain interesting phenomena
The systems 'societies' use, to allocate scarce
, resources, to the production of goods and services,
What do economists study? and to distribute these goods and services to
consumers.
I.e. How societies manage the use of scarce resources.
Early economists observed that people seem intent
Economic rationality
to set up systems that work 'efficiently' i.e. they
yield the greatest net benefit.
, ▪ Traditional - follow in the family business, traditional
practices in the home...
▪ Command (or planned)
Our 'system' is a mix of ◦ Authoritarian - owner/manager of a business or household
several systems, what are
◦ Bureaucratic - large companies, local councils,
they?
central government (large complex organism)
▪ Market
◦ Farmers' market, supermarkets, George St, Trade-me
▪ Adam Smith
Important historic economists ▪ David Ricardo
▪ Robert Malthus
A graph that shows the various combinations of
Production Possibilities output that the economy can possibly produce
Frontier (PPF) given the available factors of production and
the available production technology.
Fixed:
▪ A fixed level of production technology
Aspects of the production ▪ A fixed amount of 'plant and equipment'
process
All other aspects (i.e. inputs) are variable
▪ Natural resources (N) - land, air, sunshine, minerals etc.
Resources (A.K.A Factors of ▪ Human resources (L) - Labour
Production, Inputs) ▪ Produced resources (K) - aka 'capital' - machinery,
expertise, intermediate inputs e.g. car paint and body
