EOY Exam Revision

Chapter 1

What is economics?

Basic Economic Problem

• Forms the core of economics

• related to

  • Scarcity: Unlimited wants and limited resources
  • Choices: have to be made between resources due to the scarcity of them
  • Opportunity Cost: Value of the next best alternative foregone by making a choice

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• What to produce?

• How to produce?

• For whom to produce?

• How much to produce?

Economic Systems

• exist to solve the four basic questions

The use of models

• Simplified representation of economic reality showing relationship between certain economic variables
• Determine cause and effect
• Ability to predict events accurately
• PPF is an example

Production Possibility Frontier

• Used to visualise the opportunity cost of producing