justrun-.

econs lecture test tmr

There is an Econs lecture test tomorrow. So in order to spend my time efficiently, I shall do ONLINE BLOGGING REVISION. Yay! Must fully utilise all the time and resources available, no? :D

KEY TERMS
Macroeconomics- affect WHOLE economy
Microeconomics- affect firms/ SMEs
Normative statement- deals with what ought to be, cannot be tested, a value judgement
Positive statement- deals with what has been/ is/ will be, can be tested
Scarcity- the situation in which unlimited human wants cannot be satisfied by the limited resources
Opportunity cost- the cost of an activity in terms of the next best alternative forgone

Basic economic problem is how to allocate resources available effienctly such that economy can have maximum benefit.

Factors of Production
1. LAND- all free gifts from nature (e.g: dead leaves, air, sand in a desert)
2. LABOUR- human physical and mental input
3. CAPITAL- all man-made assets used in production which themselves have been produced
+human capital: knowledge and skills that enhance ability to produce
+physical capital: buildings, machinery, semi-produced products
4. ENTREPRENEURSHIP- the ability to take risks and make decisions in order to organise other FOPs

Scarcity means that economies have to make CHOICES to allocate their resources
Fundamental choices to make for production:
1. WHAT AND HOW MUCH (allocation of resources)
- type of good to produce
- quantity of good to produce
2. HOW TO PRODUCE (method of production)
- labour/ capital-intesive
- dependent on aim of producer and resources available
3. FOR WHOM TO PRODUCE
- in order to prevent wastage, goods must be produced for those who want it the most

HOW these choices are made depends on the type of economic system, namely:
Command Economy (government decides)
Market Economy (laissez-faire, people decide)
Mixed Economy ( a little of both)

As resources are finite in amount, once a choice has been made, these resources cannot be used for any other purpose. Thus, an opportunity cost will be incurred.

However, exceptions are:
1. FREE GOODS: goods that are abundant in nature
- note that for something to be truly abundant, one must first define boundaries (e.g. sand is truly abundant in the desert)
2. SINGLE USE FACTORS: resources with only one particular use
- producing goods with this resource will not mean having to sacrifice production of another good
- e.g. hydroelectric plant that has already been built: generating electricity will not incur an opportunity cost

Concepts of scarcity, choice, opportunity cost and efficiency can be illustrated on the Production Possibility Curve (PPC)
- shows the maximum attainable combination of goods/ services that can be produced at a given state of technology
- scarcity: points outside the PPC cannot be attained given present resources and current level of technology
- choice: economy must choose which point on the PPC as resources can only give you one combination at any one time
- opp. cost: downward sloping nature of PPC, to get more of one good, you will have to sacrifice production of another
- efficiency: every point on the PPC rep possible combinations when all resources are fully utilised and used efficiently

SHAPE OF PPC

(i) Concave- illustrates Law of Increasing Opportunity Cost
- to produce more of one good, an increasing amount of the other good must be sacrificed
- occurs when resources are not perfectly homogeneous (not equally skilled/ suited for production of both goods)
- as you go down the points on the PPC, more of X will be produced. but resources are more specialized in producing Y, less suited for producing X, so these resources will have to be redeployed resulting in an increasing amt of Y sacrificed.
- the more specialized resources are in making a particular good, the greater the opp. cost

(ii) Straight-line- illustrates constant opportunity cost
- resources are perfectly homogeneous (are equally skilled/ suited for production of both goods)
- resources are perfectly transferable to all types of production

SHIFTS in PPC

Outward shift represents ECONOMIC GROWTH
- parallel shift: available resource altered is perfectly adaptable to production of both goods
- pivotal shift: available resource altered is more suited to production of 1 good

sources of Economic Growth:

1. increase in availability of resources
- land: intensive exploration of mineral deposits = discovery of more mineral deposits
- labour: encouraging pop growth + encouraging participation of pool of pop = larger potential workforce
- capital: sacrificing consumer goods/ consumption in current period to increase capital good production, will mean larger output in capital goods in next period
- entrepreneurship: incentives to encourage individuals to start their own businesses

2. improvement in quality of resources
- labour: improvement in skills of workforce through higher education and training, better equipment to enhance productivity, reward hard work through incentives
- land: application of fertilizers, irrigation, improved techniques of production
- capital: technological improvement (new methods of production)

Inward shift can be caused by Govt policies or natural disasters or war
- due to reduction in quantity and quality of available resources

OMG BRAIN DRAIN. Okay I shall stop here (for now at least). Crap... my brain is super-saturated. Still haven't covered comparitive advantage and allocative efficient and productive efficient and the 3 economic systems! ... ... ... I am worried.

OK now to talk a little about what happened today. Spent time after school at class bench (semi) mugging. Met Pammie at the track and she introduced me to her desperate friends. That dude is seriously... HAHAHA.. nevermind. The wind was SOOPER strong and it blew my notes away! Horror of horrors! LOL. BUT fortunately I managed to get it back. Mugging in good company really helps brain absorption. Yay! Happy happy day... Feeling fat and bloated from all the carbs. I think I have an addiction to carbs. I am envious of Samuel because he can eat and eat and not get fat. Where is the justice?!?!

Right.. gotta get back to comparative advantage. The marginal gain of me blogging is less than the marginal cost thus incurring an (unaffordable) opportunity cost of me spending time doing revision!

I LOVE PPC. (till tomorrow at least)

[pat]* decided to runaway-.

put on her shoes at [19:04]

and took [20070129] strides

it's the passion that drives you