Who is the father of economics?
Adam Smith who created the wealth of nations book in 1776
What is the origin of economics?
Oikos- household
Nemin- to manage
What is the key subject matter of economics
1 scarcity
2 unlimited wants
3 allocation
Define opportunity cost
The next best forgone alternative cost
Is economics science or art?
Science- objective, uses principles, tested, rules
Art- subjective, creative, no set rules
econ- Both tested on humans
What assumptions must be made in economics
1) rational behaviour occurs
2) average income
3) competitive market
4) ceteris paribus (all other things remain constant)
What is the economic central problem?
Due to scarcity and unlimited wants every economy must decide; what to produce?, how much to produce?, and how to produce something?
What is a PPF?
Production possibility frontier which shows the maximum production combination of 2 goods and services that can be produced with given resources, time and money
All points on PPF indicate highest efficiency
What are capital goods vs consumer goods?
Capital goods can be used for further production of goods and services but consumer goods are at the end use
How do you calculate opportunity cost?
Loss / Gain
What are the two methods of production?
1)Labour intensive- more workforce used
2) capital intensive-more machinery used
What does any point INSIDE the PPF indicate?
The resources are unemployed so there is zero opportunity cost which means you can increase the output without decreasing the other units
