Economics – Basic Notes
What is Economics?
Economics is the study of
how people make choices
to use limited resources
to satisfy unlimited
wants.
Basic Economic Problem
●Resources are scarce
●Wants are unlimited
●This leads to the need
for choice
Factors of Production
Resources used to
produce goods and
services:
●Land – natural
resources
●Labour – human effort
●Capital – man-made
goods used in
production
●Enterprise –
risk-taking and
decision-making
Opportunity Cost
●Opportunity cost is the
next best alternative
that is given up when a
choice is made.
Production Possibility Curve (PPC)
●Shows different
combinations of two
goods that can be
produced.
●Points on the curve
show efficient use of
resources.
●Points inside the curve
show underuse of
resources.
Economic Systems
●Market economy –
decisions made by
consumers and
producers
●Planned economy –
government makes all
decisions
●Mixed economy –
combination of market
and planned systems
Demand
●Demand is the
quantity of a good
consumers are willing
and able to buy at a
given price.
Law of Demand
●As price falls, quantity
demanded rises, and
vice versa.
Supply
●Supply is the quantity
of a good producers
are willing to sell at a
given price.
Law of Supply
●As price rises, quantity
supplied rises, and vice
versa.
Market Equilibrium
●Occurs when demand
equals supply.
●The equilibrium price
clears the market.
Elasticity
●Elasticity measures
responsiveness.
●Price elasticity of
demand (PED)
measures response of
demand to price
changes.
Money
●Money is used as:
○Medium of exchange
○Unit of account
○Store of value
Inflation
●Inflation is a general
increase in prices over
time.
Unemployment
●Unemployment occurs
when people are willing
and able to work but
cannot find jobs.
Economic Growth
●Economic growth is an
increase in a country’s
output over time.