Scarcity, PPF, Division of Labour

Annotations:

• There is only a finite (limited) number of workers, machines, factories, acres of land and reserves of oil on the planet earth. 
• There is also a limited pot of money available to government to finance their spending priorities - the Government cannot raise taxes too much to fund health and education without affecting other areas of the economy.

1. Unlimited wants
   1. People must give up things - make choices
   2. Trade-offs
      1. Opportunity cost

         Annotations:

         • the loss of other alternatives when one alternative is chosen
2. Wants & Needs
   1. Food
   2. Housing
   3. Health services
3. Basic economic problem

   Annotations:

   • scarcity is the basic economic problem
   1. Must make decisions
      1. WHAT Goods and services to produce
      2. HOW to produce goods
      3. Who for?
4. Faced by consumers, producers and government
5. Sustainable Resource

   Annotations:

   • A renewable resource that is used in such a way that it will not run out.
6. Factors of Production
   1. Land
      1. Natural resources
         1. All scarce except Air

            Annotations:

            • Air is a free good because consumption by one person does not reduce availability to another person. Free goods have no oppurtunity cost
   2. Labour
      1. Human input
      2. Human capital

         Annotations:

         • Human capital refers to the QUALITY of labor resources, which can be IMPROVED through INVESTMENTS in EDUCATION, TRAINING, and HEALTH
   3. Capital

      Annotations:

      • Investment in goods to produce more goods in the future. Capital refers to the machines, roads, factories, schools and office blocks (which produce more goods and services)
      1. Fixed Capital
         1. Machinery, tech, equipment

            Annotations:

            • all goods designed to increase productive potential
      2. Working Capital
         1. Stocks of raw mats and components
   4. Entrepreneurship
      1. They Organise other factors to make G&S's
      2. Success depends of quality of it

Annotations:

• Curve that shows the combinations of two or more goods that can be produced while all resources are fully employed.

1. Operating inside
   1. Using resources inefficiently
2. Beyond frontier (curve)

   Annotations:

   • means allocative efficiency is improving.
   1. CURRENTLY unattainable
   2. attainable by
      1. Increase in factor resources

         Annotations:

         • due to rise in workforce, investment
      2. Increase in efficiency/productivity
      3. Tech. improvement
         1. Brings prices down
3. Curve Shape

   Annotations:

   • Means opportunity cost is changing. To have more of 1 good you need to get up even more of the other
4. Straight line

   Annotations:

   • Opportunity cost is constant
5. Movement along frontier
   1. Reallocating resources
      1. Involves trade-off

Annotations:

• Where production is broken down in the many separate tasks.

1. Advantages
   1. Faster production
   2. Cheaper production
   3. Higher production levels and output
   4. Higher pay
2. Specialisation
   1. Workers concentrate on specific tasks
   2. Can bring lower prices
      1. competition = incentive to minimise costs
   3. Wider range of goods available
3. Disadvantages
   1. Higher training costs
   2. Quality falls due to no motivation
   3. May be replaced by machinery
   4. Small range of skills

      Annotations:

      • the worker will not have a broad range of skills because their jobs are specialised.
   5. high worker turnover