BSNS 113- Otago| Latest Version
Scarcity - ✔️✔️- Sometime is scarce if there is not enough for everyone if it were free
Implies the need for trade offs
Unlimited wants - ✔️✔️- People have unlimited wants, but the resources to satisfy
those wants is limited.
Positive economics - ✔️✔️- Studying how the economy works
Normative economics - ✔️✔️- figuring out how the economy should be
GDP - ✔️✔️- Gross domestic product
Measures the market value of all final goods and services in a country
What GDP misses - ✔️✔️- Illegal activity
Home made goods
Second hand sales
Production possibilities - ✔️✔️- What a country is capable of producing given their
resources
The amount of good or services a country can produce
Main types of resources - ✔️✔️- Land - Natural resources
Labour - human time and effort
Capital - Preexisting manufactured inputs, human knowledge
Production possibilities frontier - ✔️✔️- The best we can do if we appropriately allocate
resources to those best suited to using them
,Technical efficiency of the PPF - ✔️✔️- All points of the PPF are technically efficient
All resources are allocated to their best use
Points on the PPF - ✔️✔️- Combinations of goods and services with all resources
efficiently employed
Points under the PPF - ✔️✔️- Technically inefficient, we could produce more goods
and services with the same resources
Major issue with motivating employees
Points above the PPF - ✔️✔️- Combinations of goods and services unobtainable with
current resources and technology
Opportunity cost - PPF - ✔️✔️- Making trade offs between goods and services
Opportunity cost - ✔️✔️- The loss of other alternatives when another is chosen
The net value of the next best opportunity forgone
Traditional allocation - ✔️✔️- Do stuff how its always been done
Planned allocation - ✔️✔️- Boos or committee plans production
Market allocation - ✔️✔️- Consumers and market influence economy
Terms of trade - ✔️✔️- Relative price used to trade items
Economies of scale - ✔️✔️- The larger the economy and time active, the lower the
average cost
Short run time frame - ✔️✔️- Sufficiently short time frame, where at least one variable
remains constant
Long run time frame - ✔️✔️- All inputs can be varied
, Very long run time frame - ✔️✔️- So much time that the state of technology changes
The law of diminishing returns - ✔️✔️- Short run time frame - one variable help
constant
Because of this there is a capacity limit and eventually increasing product leads to
decreasing marginal product
Absolute advantage - ✔️✔️- The ability to produce a good using fewer inputs than
another producer
Comparative advantage - ✔️✔️- The ability to produce a good at a lower opportunity
cosy than another producer
Market - ✔️✔️- A group of people
Their interactions determine prices of goods and services
Money - unit of account - ✔️✔️- Money is used as a common denominator, makes it
easy to compare prices
Money - medium of exchange - ✔️✔️- Avoids a 'double coincidence of wants'
So we aren't paid in food
Money - store of value - ✔️✔️- Holds value so you can wait to buy something
Demand - assumptions - ✔️✔️- Assumes consumers want to maximise satisfaction
Are well informed about prices
Are rational
Demand - ✔️✔️- People who are willing to buy a product for a given price
Substitution effect - ✔️✔️- If price increases, demanders will substitute out to a
cheaper alternative
Scarcity - ✔️✔️- Sometime is scarce if there is not enough for everyone if it were free
Implies the need for trade offs
Unlimited wants - ✔️✔️- People have unlimited wants, but the resources to satisfy
those wants is limited.
Positive economics - ✔️✔️- Studying how the economy works
Normative economics - ✔️✔️- figuring out how the economy should be
GDP - ✔️✔️- Gross domestic product
Measures the market value of all final goods and services in a country
What GDP misses - ✔️✔️- Illegal activity
Home made goods
Second hand sales
Production possibilities - ✔️✔️- What a country is capable of producing given their
resources
The amount of good or services a country can produce
Main types of resources - ✔️✔️- Land - Natural resources
Labour - human time and effort
Capital - Preexisting manufactured inputs, human knowledge
Production possibilities frontier - ✔️✔️- The best we can do if we appropriately allocate
resources to those best suited to using them
,Technical efficiency of the PPF - ✔️✔️- All points of the PPF are technically efficient
All resources are allocated to their best use
Points on the PPF - ✔️✔️- Combinations of goods and services with all resources
efficiently employed
Points under the PPF - ✔️✔️- Technically inefficient, we could produce more goods
and services with the same resources
Major issue with motivating employees
Points above the PPF - ✔️✔️- Combinations of goods and services unobtainable with
current resources and technology
Opportunity cost - PPF - ✔️✔️- Making trade offs between goods and services
Opportunity cost - ✔️✔️- The loss of other alternatives when another is chosen
The net value of the next best opportunity forgone
Traditional allocation - ✔️✔️- Do stuff how its always been done
Planned allocation - ✔️✔️- Boos or committee plans production
Market allocation - ✔️✔️- Consumers and market influence economy
Terms of trade - ✔️✔️- Relative price used to trade items
Economies of scale - ✔️✔️- The larger the economy and time active, the lower the
average cost
Short run time frame - ✔️✔️- Sufficiently short time frame, where at least one variable
remains constant
Long run time frame - ✔️✔️- All inputs can be varied
, Very long run time frame - ✔️✔️- So much time that the state of technology changes
The law of diminishing returns - ✔️✔️- Short run time frame - one variable help
constant
Because of this there is a capacity limit and eventually increasing product leads to
decreasing marginal product
Absolute advantage - ✔️✔️- The ability to produce a good using fewer inputs than
another producer
Comparative advantage - ✔️✔️- The ability to produce a good at a lower opportunity
cosy than another producer
Market - ✔️✔️- A group of people
Their interactions determine prices of goods and services
Money - unit of account - ✔️✔️- Money is used as a common denominator, makes it
easy to compare prices
Money - medium of exchange - ✔️✔️- Avoids a 'double coincidence of wants'
So we aren't paid in food
Money - store of value - ✔️✔️- Holds value so you can wait to buy something
Demand - assumptions - ✔️✔️- Assumes consumers want to maximise satisfaction
Are well informed about prices
Are rational
Demand - ✔️✔️- People who are willing to buy a product for a given price
Substitution effect - ✔️✔️- If price increases, demanders will substitute out to a
cheaper alternative
