Topic 1 - Introduction to Economics
What is the economic problem?
How to allocated our scarce resources, whilst society has unlimited wants
Are internal or external economies of scale caused by changes outside of the firms control?
External
What is the law of demand?
Increased price leads to lower demand
Where does the supply of labour come from?
Workers, unemployed
Who implements Monetary policy?
RBA
What is the difference between a leakage and an injection? What is the formula?
Injection is money coming IN to the economy, Leakages is money coming OUT of the economy.
I + G + X = S + T + M
What is the technical optimum?
Where average costs are at their lowest
What is the law of supply?
Increased price leads to increased supply
What is frictional unemployment?
People moving between jobs?
What is the cost of credit?
Interest rates
What are the factors of production and their returns?
Capital -- interest
Enterprise -- profit
Land -- rent
Labour -- wages
What happens to the curve during internal economies/diseconomies of scale?
Shifts along the curve
What does it mean if demand is price elastic?
Total revenue moves in the opposite direction to price
Why is the demand for labour a derived demand?
Depends on how much of a g/s is demanded
The interest rate banks give to lenders is known as the...?
Borrowing rate
How is opportunity cost visualised? Draw it.
PPF
What should MPC and MPS add up to equal?
1
Movements along the supply and demand curve are caused by what?
Price
What does the FWC do? Name 2 functions
Oversee the setting of the minimum wage, enterprise agreements, dispute resolution, termination of employment
What are the 3 objectives of Monetary policy?
1. Stability of currency
2. Full employment (4-5%)
3. Economic welfare and prosperity
Describe the business cycle using an Australian example.
Expansion, peak, contraction, trough
E.g. COVID to post COVID.
What is the consumption function? And what are the components?
C = C0 + cY
C0 is autonomous consumption
c is MPC
Y is income
What is the concept of consumer sovereignty?
Consumers choices decide what to produce and how much to produce
What is an enterprise agreement?
Made between employers and a group of employees for a specific type of business
When I sell CGS, am I implementing expansionary or contractionary monetary policy?
Contractionary