Tiêu đề 1. AS Economics - Notes.pdf ✅

AS – ECONOMICS (9708) MICRO CHAPTER 1 Basic economic ideas Topics Lectures Topic 1: Basic Economic Ideas 1 Topic 2: Production Possibility Curve (PPC) 2,3 Topic 3: Economic Systems 4

AS / MICRO — [NOTES] — CHAPTER 1 AATIK TASNEEM | AS / LEVEL: ECONOMICS (9708) | 03041122845 2 3. The THREE basic economic questions All the three economic agents (Individuals, Firms and Government) try to answer the following three basic economic questions: Question Description 1. What to Produce? What goods and services should be produced and how should the resources be allocated? 2. How to Produce? How should the economic resources be used to produce the goods and services 3. For whom to produce? How should the goods be allocated among the population? Understanding the target population. 4. Choosing at the margin Definition | Margin: This implies that economic decision makers will take a decision to compare the benefits of an extra activity to the cost of the extra activity. If the marginal benefit exceeds the marginal cost you go ahead with the decision Marginal Benefit > Marginal Cost à Go ahead with the decision Marginal Benefit < Marginal Cost à Do not take the decision 5. The time dimensions Time Dimension Description 1. Short Run This is a time period where firm is able to change some usually one and not all factor inputs. Example: Labor might be variable but capital and land might be fixed. 2. Long Run This is a time period a from can change all factors of production. This makes them more flexible. Example: Hire more labor, more capital etc. 3. Very Long Run This is when the entire industry/market may be able to adjust. This is because not only that all factors of production are variable but also key inputs like technology, government regulation and social norms are variable. 2. FACTORS OF PRODUCTION Definition: These elements are required to carry out a business activity are collectively known as the factors of production. These include: Factor Description 1. Land It represents all the natural resources which are consumed during the business activity, e.g. plains, seas, mines etc. (Rent) 2. Labor The term refers to any kind of physical or mental human effort. E.g. carpenters, doctors, etc. (Wages and Salaries) 3. Capital The term refers to the manufactured resources required in the production process. E.g. machinery, tools, equipment, vehicles etc. (Interest) 4. Enterprise Also known as entrepreneurship. This is the skill and risk-taking ability of the person who brings the other three resources or factors of production together to produce a good or service. They are innovate to promote efficiency For example, the owner of a business. (Profits and Dividends) Note: These factors of production tend to vary from economy to economy. Agricultural economies tend to reply more on the primary output whereas industrialized economies tend to reply on the secondary output.