introduction

introduction - Economics HL Notes Section 1: Introduction...

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Economics HL Notes Section 1: Introduction to Economics Graeme (graemestanding@hotmail.com) [ 1 ] Section 1: Introduction to Economics Social science: A science (the pursuit of systematic and formulated knowledge) that is applied to human behaviour. Economics: The study of how people use their limited resources in an attempt to satisfy unlimited wants. Microeconomics: Microeconomics focuses on individual markets and decisions by individual households and firms. Macroeconomics: Macroeconomics focuses on the economy as a whole, e.g. it considers the price level for the economy as a whole, rather than for one market. Growth: An increase in the quantity of goods and services that an economy produces. Development: An improvement in living standards/quality of life for most people. Sustainable Development: Economic development for one generation that will not impact negatively on the living standards of future generations. Positive economics: Economics that involves factual and testable statements that are either correct or incorrect. Normative economics: Economics that involves subjective, political or opinion statements. Ceteris paribus: “All other things being equal” Scarcity The basic economic problem is scarcity. To be more accurate, the problem is finite resources (land, labour, capital and enterprise) in relation to infinite wants. We are therefore forced to make choices between having one thing, and not having another. Unlimited wants + limited resources / factors of production relative scarcity. What to produce? How to produce? For whom to produce? Factors of production are the scarce resources that an economy has at its disposal to produce goods and services. Land represents natural resources. Payment: Rent Labour is the human effort (physical and mental) used in production. Payment: Wages Capital is goods that are used to produce other goods, and requires an economy to forgo current consumption. Payment: Interest Enterprise, also a human resource, organises the three other factors to produce goods and services. Payment: Profit
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introduction - Economics HL Notes Section 1: Introduction...

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