BUSS1000 Study Guide - Final Guide: Hinder, Collective Buying Power, Monetary Policy
5 Jun 2018
School
Department
Course
Professor
Define economics and explain why scarcity is central to economic decision making
•
Differentiate among the major types of economic systems
•
Explain the interaction between demand and supply
•
Identify four macroeconomic issues that are essential to understanding the behaviour of the economy
•
Outline the debate over deregulation and identify four key roles that governments play in the economy
•
Identify the major ways of measuring economic activity
•
Learning Objectives:
LO1: Define economics and explain why scarcity is central to economic decision making
Know glossary to the right
= economic resources needed to produce good or provide service
•
Natural resources
○
Human resources
○
Capital (money, buildings, machine and tools to produce good/service)
○
Entrepreneurship
○
Knowledge (collective intelligence of an organization)
○
Include:
•
Factors of production:
Scarcity = given resources have a finite supply
•
At every stage of the economic activity, people and organizations compete for the needed resources
▪
Businesses and industries compete for customers, resources and employees
▪
Consumers compete with other consumers
▪
Creates competition for resources
○
Universal scarcity for resources forces trade offs
▪
Giving up something to something else
▪
Using financial funds launching a new product rather than product development
▪
Forces trade-offs on the part of every participate in the economy
○
Scarcity has two powerful effects
•
Opportunity costs = value of most appealing alternative from all those that weren't chosen (measure value of what you are giv ing up to purse another
opportunity.
•
The economic impact of scarcity:
LO2: Differentiate among the major types of economic systems
Roles that individuals, business and government play in allocation society's resources depend on society's economic system
•
Free market systems
○
Planned systems
○
Categorized as either:
•
Economic systems
Individuals and companies decided what is produce, how to produce them, who to sell to and price.
•
Private parties (individuals, partnerships and corporations) own most business and control competition, supply, demand and determine which
good/service to produce.
○
Capitalism and private enterprises are terms used to describe free market systems
•
Most modern economics exhibit a combination of Capitalism and socialism
○
No economy is really "free"
○
Government bodies (local, state, national and international) intervene in situations where is deem socially or economically undesirable.
○
This limited intervention is a characteristic of mixed economy/capitalism.
○
Tax incentives for allocation of resources
▪
Prohibiting and restricting sales of particular goods/service
▪
Involve maximum allowable prices (limiting rent increases)
□
Minimum allowable prices (minimum wage level)
□
Price control
▪
Examples:
○
Major systems
•
Free market systems:
Understanding Basic Economics (Reading)
Friday, 9 March 2018
11:55 AM
Lecture Page 1
= governments largely control the allocation of resources and limit freedom of choice to accomplish government goal
•
Government goal is social equality --> find private enterprises and gain as wasteful and exploitative
•
Communism = system that allows individuals the least amount of economic freedom
•
High degree of government planning and ownership of capital resources
○
Government ownership tends to focus on industries that are vital to common welfare (transport, health care, communication)
○
Private ownership is permitted in other industries
○
Socialism lies between capitalism and communism
•
Both capitalism and socialism has advantages and disadvantages
○
Most modern economies combine both aspects
○
RLA:
•
Planned systems:
Government change structure of economy
○
Takeover/ take ownership of private business and industries (extreme case)
○
Nationalization
•
Services once performed by governments are performed by private companies instead
○
Reason = belief that private firms motivated by profit incentives can do a better job of running facilities.
○
Privatization
•
In the US private companies own/operate number of highways, bridges, prisons and other infrastructure elements once provided by the
government
○
Example:
•
Nationalization and privatization:
LO3: Explain the interaction between demand and supply
Every business transaction is an exchange between a buyer and seller
•
In a free market system, the marketplace and forces of demand and supply determine quantity and price of product/service.
•
Amount of a good or service that customers will buy at a given time at various prices
○
Refers to behaviour of buyer
○
Demand:
•
Quantities of good/service that producers will provide on a particular date at various prices
○
Behaviour of seller
○
Supply
•
Forces of demand and supply
Demand curve = graph showing the relationship between amount of product that buyers will purchase at different prices (all ot her factors being equal)
•
Demand increases --> companies raise prices / keep price strong
•
Demand decreases --> companies lower prices to stimulate more purchases
•
Customer income
○
Customer preferences towards product
○
Price of substitute product (products that can be purchases instead of air travel like rail tickets/car travel)
○
Price of complementary products (hotel accommodation for airline)
○
Marketing expenditures
○
Customer expectations about future prices and own financial well being
○
Factors that cause overall demand to increase or decrease
•
Example
•
Understanding demand:
Lecture Page 2
Firms willingness to produce and sell a product increases as price it can charge and profit potential increases
•
Price goes up --> quantity supplied goes up
•
Price declines --> quantity seller is willing to supply declines
•
depicts relationship between prices and quantities that sellers will offer
○
Movement often slopes upward
○
Cost of production
▪
Competition
▪
Technology production costs
▪
Taxes and regulatory costs
▪
Factories affecting supply:
○
Supply curve:
•
Understanding supply:
Buyers want to buy item at lowest price
○
Sellers want to sell item at highest price
○
Buyers and sellers have opposite goals
•
Comprise for buyer and seller
○
Demand and supply curve intersect
○
At this point, customers are willing to buy item that company is willing to sell
○
Equilibrium price is affected by variables (same as supply and demand)
○
Equilibrium point
•
Understanding how demand and supply interact:
Lecture Page 3
Document Summary
Define economics and explain why scarcity is central to economic decision making. Differentiate among the major types of economic systems. Identify four macroeconomic issues that are essential to understanding the behaviour of the economy. Outline the debate over deregulation and identify four key roles that governments play in the economy. Identify the major ways of measuring economic activity. Lo1: define economics and explain why scarcity is central to economic decision making. = economic resources needed to produce good or provide service. Capital (money, buildings, machine and tools to produce good/service) Scarcity = given resources have a finite supply. At every stage of the economic activity, people and organizations compete for the needed resources. Businesses and industries compete for customers, resources and employees. Forces trade-offs on the part of every participate in the economy. Using financial funds launching a new product rather than product development.
