The Definition of Economics
Economics - The study of production, distribution and exchange of goods in an economic system
Economics is a science that studies human behaviour as a relationship between an end and a scace means
Opportunity cost – The cost of the alternative forgone to pursue another alternative
The Australian economy consists of factor markets where factors of production (land, labour capital and enterprise) are bought and sold and product markets where final goods and services are bought and sold as wholesale or retail
Economic analysis is concerned with positive economics which attempts to explain why people behave in a certain way
Microeconomics – The study of individual economic behaviour and the operation of markets
Macroeconomics – The study of aggregate consumer behaviour or activity in the economy as a whole

Process of Economic Methodology

Wants can be basic wants (goods needed to sustain life) or luxury wants (goods that assist living standards eg. Cars and TVs
Basic Wants – Wants that must be satisfied in order to sustain life
Recurring Wants – Wants that must be continually satisfied
Substitute Wants – Wants that are consumed in lieu of other wants
Complementary Wants – Wants that are consumed in conjunction with other wants
Luxury Wants ­­– Discretionary wants that raise living standards
Individual Wants – Wants affected by personal preference and trends
Collective Wants – Wants demanded by a community
Consumer Goods – Either single-use goods or durable goods, provide immediate satisfaction
Capital Goods – Goods that are used to produce more capital or consumer goods in the future, are subject to depreciation by obsolescence and wear and tear

The Economic Problem – Flowchart

The economic problem arises because the supply of resources is finite compared to the demands of an individual

The Four Factors of Production
Land – Natural resources such as agricultural land, animals and soil. Returns Rent...