Nat 5 Economics Guaranteed Success

Nat 5 Economics Guaranteed Success The basic economic problem ️️the mismatch of unlimited wants and needs and limited resources. Why do we have unlimited wants ️️greed, successful advertising and innovation Why do we have limited resources ️️Scarcity of goods cause limited resources What the difference between a need and a want? ️️- A need is something you need for survival eg. Food and water - A want is something that makes ur life more pleasant (luxury) e.g TV and phone What are the factors of production and their returns ️️-Land (all natural resources. eg. Forrests). The return from land is rent. -labour (all Human Resources. eg. Builders and dentists). The return from labour is wages -capital (all man made resources to aid production. eg. Machinery and roads) the return from capital is interest -enterprise (organises the other factors of productions, normally self employed. Eg. Farmers etc) the return from enterprise is profit Opportunity cost and an example ️️-The sacrifice of the next best alternative and all its forgone benefits -for example if you had to choose an iPad or and iPhone and you chose the iPhone. The opportunity cost would be the iPad and all its benefits p. Opportunity cost for consumers, firms and governments ️️CONSUMERS- consumers have a limited income to buy all they want. Therefore have to decide how too spend there income on what would give them the greatest satisfaction. FIRMS- firms have limited resources to produce all they would like therefore have to decide what too produce in order to make the most profit GOVERNMENT- governments have limited tax revenue therefore have to choose what too spend their revenue on to benefit society the most Resource substitution ️️Replacing one factor of production with another. Most commonly labour is replaced with capital. This has the following benefits: • Reduces costs as no wages • Less error • Greater speed-machines don't tire There are the following disadvantages: • Unemployment • Not all jobs can be automated • Machines are expensive Occupational mobility of resources ️️The ability of a resource to change use. For example, a factory being used to produce different goods What is demand ️️The willingness and ability to buy a good or service at a given price Why does the demand curve slope downwards ️️Substitution effect- consumers will substitute out of the market into competitor markets Income effect- consumers are able to afford less with the same level of income. Consumers are less able to buy the product with their limited income Law of diminishing marginal utility- consumers get less satisfaction from each subsequent unit and therefore are less willing to pay a high price. Consumers are less willing to buy the product as there is less value for money. Conditions of demand ️️-Increases in population means that more people will be demanding goods and services at all prices. -Good advertising campaign could mean that people will be aware of the good and more will buy it. -Price of a substitute increases which could mean that people will stop buying the substitute and switch to this good. What is supply ️️Supply is the quantity of a good a firm is willing to produce and sell at a given price Why the supply curve slopes upwards ️️Higher Profit - there will be a higher profit per unit so firms will have an incentive to expand supply. New firms enter the market - an increase in price will encourage firms to switch resources to this market. This will cause an expansion in supply. Conditions of supply ️️Indirect taxes eg. VAT.- If "VAT" increases a firm cannot produce as much at all prices. As this is a raise in the costs of production it will cause an inward shift of the supply curve Number of Firms - if more firms join the industry, more is produced at all prices and this will cause an outward shift of the supply curve. Weather - if there is good growing conditions firms will be able to supply more at all prices (bumper harvest) and this will cause an outward shift in the supply curve. What is THE MARKET ️️A market is where the buyers and sel