Economics Preliminary Topic One – Introduction to Economics

Resource Description

topic one – introduction to economics with HSC style questions answered

Preliminary Topic One – Introducton to Economics
The Nature of Economics:
 Economics is the study of how we solve the economic problem. The economic
problem is how we satisfy our unlimited wants with our limited supply.
– Scarcity is the economic problem
– Resources are the inputs that are used in the production and supply of goods
and services (factors of production)
 Since we cannot satisfy all our wants with the limited resources available, we
must choose and prioritize between them.
 Opportunity cost is the cost of not following the option not chosen. A graph
which shows opportunity cost and represents what an economy can produce at a
point in time is the Production Possibility Frontier:
– PPF assumptions:
 straight line shows resources are transferrable between 2 goods
 curved line represents that resources aren’t completely transferable
 the factors of production are working at full capacity
 technology is fixed
 only have 2 options of goods