Econ Class 1

Supply and demand mainly affects global prices and not the price of its components

e.g. oil price dropped, but petrol price is still high due to demand for petrol cost is related to cost for refining oil made months ago, that was more expensive

Trade is how we achieve economic growth

• side-effect: also comes with standard of living
• free markets :)

In economics you should:
- adopt different perspectives when analysing situations
- evaluate the benefits and costs of individual and social choices
- examine and understand how certain events and issues are related

Economics is:

• "A study of human behaviour as a relationship between ends(final products which we want) and scarce means which have alternative uses."

Scarcity is important

• Relative scarcity in particular
• Things are scarce but only relative to what we want to use them for
• "The study of how men allocate their scarce resources to provide for their wants." (J Harvey) Scarcity: Insufficient resources available (limited resources) to produce all that people desire (unlimited wants)

Two main branches of economics:

• Microeconomics
• Macroeconomics (what we do now)

The Basic Economic Problem (BEP)

• Insufficient resources available (limited resources) to produce all that people desire (unlimited wants)
• Additionally, resources have alternative uses

Relative scarcity: based on relationship between wants and resources

**Resources are scarce relative to the demand for goods and services**

• Relative scarcity means that we do not have enough resources to satisfy all our wants and needs.
• Are there goods that have no cost? No!
• What are examples of free goods? There are none!
• Free goods are goods which have no price, no property price, and require no factors of production for enjoyment.
• NO goods are free (except things like air/sunshine)
• All goods have an economic cost.
• Due to scarcity, people are forced to make choices.
  • Examples include:
    • Wood is scarce. Can be used for furniture items, pencils, etc.
    • Time is scarce. It can be used for any welfare enhancing activity - study, work etc.
• Resources cannot be used for all wants at the same time - note resources have alternative uses, and can be used to satisfy all wants.
• We need to CHOOSE.
• Scarcity -> Choice -> Consequences -> Opportunity cost
• When a choice is made, it involves a sacrifice known as an opportunity cost.

**Opportunity cost is the real cost of the next best alternative (in the scale of preference) that is forgone in order to obtain more of something else.**

Resources have alternative uses, but,

These alternative uses have **varying degrees of efficiency**.
When moving resources around, efficiency may be affected, and **the output may be affected**.

• Coronavirus: •The world today is suffering from shortages across multiple sectors.

  •What is being affected?

  • Travel
  • Maritime trade
  • Building
  • Labor markets
  • Agriculture/Horticulture
  • Medicine/Hospitality
  • Transport
  • Mining
  • Retail industry
  • Fast food industry
  • Airlines
  • Groceries
  • Stock market? (specific goods related)

  •How is this manifesting in society?

  • Builders have gone bankrupt because high labour costs, cost of materials, transport costs
  • There's less patrons in the airports, bags are being lost
    • Cancelled flights, prices are increasing

  •Why did the supply chains function so well pre covid and what is the problem during Covid?

  • Production efficiency, as it was running smoothly before the pandemic
  • Lack of resources slow it down

  •What is the cause of the supply shortages?

  • Lack of willing employees for the supply chain industry
  • Lack of resources
  • Effects of quarantine laws •How does this relate to the basic economic problem?
  • The weakened supply chain reduces the supply for specific resources throughout global populations, increasing demand and cost
  • People will make choices to protect their survival (generally), and less important goods/services such as entertainment services (Netflix) will lose the most business.

**What is the different between a product market and a factor market?**
**Answer: Product market sells consumable products e.g. foods, while factor market sells resources, e.g. labour**

Production Possibility Curve/Frontier:

• Fundamental Assumptions:
  • The economy can only produce two goods or services
  • The state of technology is constant/fixed
  • The quantity of resources available remains unchanged
  • On the curve, all resources are fully employed - no unemployment, every machine is being used, all resources are being utilize

Exam Q: "to illustrate the possibility of opportunity cost, use model." PPF is the model you should use NOTE: If you are on any point on the PPF, then you have utilized all your resources to produce that combination of goods. Thus, any point on a PPF is the most efficient point.

Points inside the curve represent inefficiencies. Here, not all resources are being utilized.

Points **outside the curve** are **impossible.**

Trade is important, because other countries can be more efficient at producing something than you.

title: Research
**Law of diminishing returns**

• Textbook Q Answers:

  1. There are unlimited wants, but limited resources. Furthermore, resources have alternative uses which have vary levels of efficiency.

  2. Limited resources and high demand.

  3. What to produce, how to produce, who to produce for.

  a. Depending on what is popular at the time, specific trends in fashion may be prioritized for production. E.g. if dresses are popular now, then producers may focus their resources on producing dresses. b. When available resources are scarce, producers may prioritize products that can be most efficiently made with their limited resources. c. in a weak local economy, consumers may produce cheaper products in greater qualities, so that their products become more affordable. 5. Products that require intense labour tend to incur greater labour costs, so producers may opt to produce products that involve less labour. 6. The Japanese economy is more service-centred, and also focuses on industries that do not require common natural resources, or wholly depend on imports (such as technology). 7. China has an abundance of cheap labour and natural resources. This allows manufacturing costs to be cheap, as its abundance in labour and natural resources decreases the overall costs for production. This allows the products to be exported at a profit, which is why it is seen ass world producer 8. a.

  1. New shoes

  2. Notebook

  3. Chemistry coursebooks (5)

  4. Lava lamp

  5. Grand piano

  6. Fedora b.

  7. Because my shoes are old

  8. Because widjaja has it and its cool

  9. Because chemistry is fun (not)

  10. It looks cool

  11. Because my piano sucks and im doing grade 7 piano and i need one

  12. It looks cool c. I would not get a fedora :( d. I don't care about them.

  13. a. You lose 100 tonnes of wool. b. You don't produce 300 tonnes of wheat. c. It depends on the market price of wheat and wool at the time. For both options, if the farmer wishes to maximise his profit, he should choose the level of production that maximises profit, given the current market price for wheat and wool.

  14. In order to increase funding for the war in Iraq, and to cut taxes for the rich, Bush would have to take money from the U.S. budget. This means that other sectors of the budget would not get money, such as infrastructure, education and healthcare.

  15. Labour-intensive refers to industries that rely on labour to produce goods. Capital-intensive refers to industries that rely on heavy machinery or capital investments to produce goods. Examples of labour-intensive industries include clothing, and accounting. Examples of capital-intensive industries include microchips and car manufacturing.

  16. Consumers' demand for a certain product will influence its value, as low demand results in consumers being less likely to pay high prices. This leads to consumers producing less of the product. For example, if it is revealed that coffee is extremely dangerous, then people are less likely to buy coffee, reducing demand, and subsequently the cost will increase. Furthermore, if coffee was revealed to be extremely healthy, people would buy more of it, and the demand would increase, increasing the price as producers increase production.

  17. The government may use their budget to purchase from specific industries, increasing the demand and value of said industries. For example, if the government were to invest in more mining sites, this would increase the amount of capital in the mining economy, allowing the potential for greater demand.

  18. The financial cost of a desalination plant would be the actual capital cost to build and maintain a desalination plant. However, the opportunity cost is the financial cost to the government for not investing the financial cost elsewhere, in industries such as healthcare.

  19. a. Computer. Computer's may be advertise on large billboards, or though online ads. b. c. Consumers influence demand, while producers influence supply. Both in conjunction to influence cost, which in turn influences the quantity in which certain products are produced.

$\frac{(a^{4}\times a^{-9})^{\frac{1}{2}}}{a^2}$

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