Basics - Economics Unit 1

• Economics is how we allocate scarce resources to infinite wants and needs.
• The opportunity cost is the cost forgone from the next best alternative
• Specialisation is the division of labour, this can increase production, reduce average cost however problems include tedium
• Sustainable means meeting the needs of today without affecting the needs for future generations
• A positive statement is one that is a fact as opposed to a normative statement is one that is a value judgement, includes words like 'unfair'.
• scarcity means limited resources
• Factors of production are land, labour, capital and entrepreneurship.
• A free market is one where there is no government intervention and left to the price mechanism. A mixed market economy is the most common where there is government intervention in certain markets. A planned economy is one where the government controls the resources ie. North Korea.
• PPFs show the trade off between 2 goods or services. The opportunity cost changes because it is not a straight line but a curve. A shift of the PPF outwards shows an increase in the productive potential. Can be caused by new technologies or a discovery of new resources ie. new oil field.