‭CHAPTER 1: WHAT IS ECONOMICS About?

‭1.1 The economic problem‬

‭ he economic problem‬‭- How can society satisfy the‬‭unlimited wants with limited resources ‬
T
‭available?‬
‭-‬ ‭Our wants are unlimited‬
‭-‬ ‭Resources are scarce and there aren’t enough to satisfy all our wants‬
‭-‬ ‭Therefore we must choose which wants we want to satisfy (We satisfy the wants that are a ‬
‭priority and leave other wants unsatisfied)‬
‭Economics is essentially trying to allocate our limited resources appropriately to fulfil our unlimited ‬
‭and competing wants. Each decision we make involves an opportunity cost. ‬

‭Understanding wants‬
‭●‬ ‭Economics assumes that humans pursue maximum self-interest and attempts to help ‬
‭organise production in order to satisfy our wants accordingly‬
‭●‬ ‭Wants ‭-‬ Material desires of the individual/community,‬‭often providing some sort of ‬
‭pleasure/satisfaction when consumed ‬
‭●‬ ‭Needs‬‭- Basic necessities of life‬
‭●‬ ‭Individual wants ‭-‬ The desires of an individual person‬‭(this depends on personal preferences, ‬
‭also influenced by social trends) - The less income a person has, the fewer wants they can ‬
‭satisfy ‬
‭●‬ ‭Collective wants‬‭- Desires of the whole community,‬‭and are usually provided by the ‬
‭government e.g parks, libraries, schools, hospitals - These are funded through taxation‬
‭●‬ ‭Recurrent wants‬‭- goods or services that we continuously‬‭need e.g clothes, food‬
‭●‬ ‭Complementary wants ‭-‬ Wants that come with purchasing/consuming‬‭other wants e.g vinyl ‬
‭records when purchasing a vinyl player, ink cartridges when purchasing a printer‬
‭●‬ ‭Our wants also change overtime - Factors that affect changes in wants include age, income, ‬
‭technology, fashion e.g an 11 year old may want a video game console and a 21 year old ‬
‭may want a car‬

‭The key economic questions‬

‭1.‬ ‭What to produce?‬‭- An economy can not produce all ‬‭wants due to limited resources and so it ‬
‭must decide on which products to produce and which ones not to‬
‭2.‬ ‭How much to produce?‬‭- Allocating resources efficiently‬‭to ensure the maximum satisfaction ‬
‭of wants, involves deciding how much of each product should be produced. This means ‬
‭looking at demand and supply to predict which products more people want‬
‭3.‬ ‭How to produce?‬‭- An economy must decide how to allocate‬‭resources in a way that uses the ‬
‭least amount of the economy’s resources‬
‭4.‬ ‭How to distribute production?‬‭- Each person’s total‬‭share of production depends on their ‬
‭level of income (People with higher incomes can afford to purchase more and consequently ‬
 s‭ atisfy more of their wants). Economies must decide on a more equitable or inequitable ‬
‭distribution of production‬

‭Opportunity cost‬
‭●‬ ‭Making a decision involves making a sacrifice/extra cost e.g going on holiday but sacrificing ‬
‭buying a car‬
‭○‬ ‭An opportunity cost is the alternative we sacrificed to satisfy one of our wants‬
‭○‬ ‭Due to relative scarcity not all wants can be satisfied ‬
‭○‬ ‭A ‭c‬ onsumer‬‭choosing between being a homeowner or having‬‭kids‬
‭○‬ ‭A ‭b‬ usiness ‬‭choosing between which product to produce‬‭& sell‬
‭○‬ ‭A ‭g
‬ overnment‬‭choosing between whether to build a school‬‭or hospital‬

‭1.2 The production possibility frontier‬

‭-‬ ‭ sed to demonstrate the opportunity costs when individuals/firms/government makes ‬
U
‭choices‬
-‭ ‬ ‭Shows the possible combinations that can be produced for two products‬
‭-‬ ‭Factors to take into account include:‬
‭-‬ ‭State of technology is constant ‬
‭-‬ ‭Fixed quantity of resources‬
‭-‬ ‭All resources are completely used‬

‭A simple production possibility frontier‬

‭●‬ ‭You are to assume that‬
‭○‬ ‭The economy only produces two goods‬
‭○‬ ‭The state of technology remains the same‬
‭○‬ ‭The amount of resources is fixed‬
‭○‬ ‭All resources are fully employed ‬

‭●‬ T ‭ he following graph displays all possible ‬

‭combinations of units for the two products‬
‭●‬ ‭We can choose to produce any amount between ‬
‭A & B‬
‭●‬ ‭How much we produce os dependant on society ‬
‭and the demand for a product‬
‭●‬ ‭If the economy is producing inside the curve, all ‬
‭resources are not being fully employed and the ‬
‭economy is producing less than its max output‬
‭●‬ ‭When the economy wants to change production ‬
‭there is an opportunity cost ‬
 ▶️
‭●‬ I‭f you change from 160U oil + 0U leather 120U oil + 20U leather; this is giving up ‬
‭40U of oil for 20U of leather ‬
‭●‬ ‭Therefore the opportunity cost in this scenario is 2U of oil (for 1U of leather)‬

‭New technology and the frontier‬

‭●‬ T ‭ he production possibility frontier can also change ‬

‭and does not stay the same‬
‭●‬ ‭Eg new technology may mean an increased maximum ‬
‭output with the same resources (represented ‬
‭graphically by an outward shift)‬

‭New resources and the frontier‬

‭●‬ I‭ncreasing the production inputs (more resources) ‬

‭will increase the production possibility frontier‬
‭●‬ ‭Things that may increase availability of production‬
‭○‬ ‭Discovery of new resources ‬
‭○‬ ‭Expansion of the population through ‬
‭immigration (more employees available)‬
‭●‬ ‭Graphically it would push the line forwards‬
‭Unemployment and the frontier‬

‭●‬ T ‭ he production possibilities frontier can help us ‬

‭understand the consequences of unemployment‬
‭●‬ ‭Unemployment is when a person is unable to find ‬
‭work, however a similar situation may occur for the ‬
‭input into production‬
‭●‬ ‭If the resources are not fully used (employed) then ‬
‭the maximum output cannot be produced and we ‬
‭will end up inside the curve e.g Point A‬
‭●‬ ‭Essentially this means that we are not achieving ‬
‭the maximum output within a minimum ‬
‭opportunity cost and so this economy is inefficient‬

‭The shape of the production possibility frontier‬

‭●‬ F ‭ or the production possibility frontier to be a straight ‬

‭line it must be possible to substitute all resources ‬
‭interchangeably between the two products‬
‭●‬ ‭However this normally is not the case as some ‬
‭resources may be better suited for oil and others for ‬
‭leather‬
‭●‬ ‭Therefore when resources that are better suited for ‬
‭oil are used to produce leather, they become less ‬
‭productive, making the opportunity cost for ‬
‭producing leather higher‬

‭1.3 The future implications of choices‬

‭‬ E
● ‭ conomic choices made today can greatly influence economic outcomes of the future‬
‭●‬ ‭An economy can choose between producing goods that satisfy current consumer demand ‬
‭(‭c‬ onsumer goods)‬‭& goods that will increase out productive‬‭capacity in the future (‬‭capital ‬
‭goods)‬
‭●‬ ‭Capital goods do not currently satisfy consumer wants, however they will allow the economy ‬
‭to satisfy these wants in the future by expanding the production capacity ‬
‭●‬ ‭An economy that focuses more on the production of capital goods, will experience a higher ‬
‭level of economic growth in the long run‬
‭●‬ ‭Examples of future implications:‬
 ‭○‬ I‭f an ‬‭individual ‭c‬ hooses to sacrifice living an extravagant lifestyle in order to take out ‬
‭a mortgage and purchase a house, they may struggle in the present however they ‬
‭will be financial strong in the long run, living without the stress of having to pay rent‬
‭○‬ ‭In order to maximise profit, a ‬‭business ‭n ‬ eeds to focus‬‭and allocate all resources to a ‬
‭particular area of business activity - Sometimes these businesses may need to enter ‬
‭fields that they predict will benefit them in the future, instead of choosing a field that ‬
‭is already popular (entered too late and unable to obtain competitive advantage)‬
‭■‬ ‭E.g businesses investing in telecommunication and information technology a ‬
‭decade ago ‬
‭○‬ ‭A ‭g ‬ overnment‬‭may allocate most spending to satisfying‬‭consumer needs while also ‬
‭sacrificing funding for education, infrastructure and research/development. This will ‬
‭result in a long term lower level of economic growth because the country will have a ‬
‭lower skill level in the future and weaker infrastructure‬
‭ ‬ ‭EDUCATION‬
●
‭○‬ ‭Investing in higher education and sacrificing enjoyment in order to improve ‬
‭workforce skills - ultimately resulting in an increasing income in the future‬

‭1.4 The economic factors underlying choices‬

‭●‬ W
‭ hen making economic decisions, everyone needs to weigh up factors relating to their short ‬
‭+ long term objectives to make the best decision‬

‭Individuals‬
‭●‬ ‭Factors that shape individual economic decisions include ‭a ‬ ge, income, expectations, future ‬
‭plans, family circumstances, personality‬‭(some people‬‭keen to embrace risk while others ‬
‭prefer security)‬
‭●‬ ‭Individuals must make a choice regarding how much money they will save and spend (age, ‬
‭income level, performance of assets they hold)‬
‭●‬ ‭If you were planning on undertaking further education - forgoing income for several years ‬
‭meaning individual’s consumability will be restricted ‬
‭●‬ ‭Contributing to elections is another economic decision that individuals make (different ‬
‭parties would run the economy differently)‬

‭Business‬
‭●‬ ‭The prices chosen by businesses are influenced by the desire to maximise profit ‬
‭●‬ ‭Businesses will also seek the cheapest resources in order to minimise cost ‬
‭●‬ ‭Businesses choose to market their product in a certain way, either to a specific or mass ‬
‭market‬
‭●‬ ‭Some businesses also focus on ethics when making decisions about their products‬
‭●‬ ‭All these choices are made to have the best economic consequences‬
‭Government‬
‭●‬ ‭Governments can have an influence on the decision making of both individuals and ‬
‭businesses‬
‭●‬ ‭Governments regulate or influence behaviour through‬
‭○‬ ‭Taxation policies‬
‭○‬ ‭Banning certain activities e.g collusion‬
‭○‬ ‭Subsidies to businesses‬
‭○‬ ‭Tax rebates ‬
‭○‬ ‭Legislation‬

‭CHAPTER 2: HOW ECONOMIES OPERATE‬

‭2.1 The production of goods and services‬

F‭ actors of production are any resources that can be used in the production of goods and services. The‬
‭four main categories of resources used to produce are Natural resources (land), Labour, Capital and‬
‭Enterprise.‬
‭●‬ ‭For each of these factors there are limits to its supply e.g limited supply of fossil fuels, labour‬
‭due to population‬
‭●‬ ‭The distribution of these scarce resources are largely determined by consumer spending, as‬
‭more resources will be distributed in sectors where there is more demand in order to achieve‬
‭maximum profit‬
‭Natural resources‬
‭●‬ ‭These include all the resources provided by the nature that are used in the production process‬
‭●‬ ‭Including: Soil, water, forests, mineral deposits, fishing area‬
‭●‬ ‭The‬‭reward (return)‬‭for natural resources is RENT‬
‭●‬ ‭The term ‘rent’ in this context covers all the income rewards derived from the productive use of‬
‭natural resources‬

‭Labour‬
‭●‬ ‭‘Labour’ is the term for the human effort used to produce goods and service, both physical and‬
‭mental‬
‭●‬ ‭Including:‬‭physical‬‭work of a carpenter or‬‭mental‬‭work of a doctor‬
‭●‬ ‭The‬‭reward‬‭for labour is wages: salaries, hourly wages,‬‭commissions, earnings of self-employed‬
‭○‬ ‭Supply for labour depends on a range of factors including: population size, retirement‬
‭age, social attitudes, educational standards‬

‭Capital‬
‭●‬ C ‭ apital goods are not produced for immediate consumption, but to be used for the production‬
‭of other goods and services that can be consumed‬
‭●‬ ‭Including: machinery, factories, computers -‬‭(these‬‭types are mostly privately owned)‬
 ‭●‬ ‭Infrastructure‬‭is a type of capital that is owned by the community as whole‬
‭○‬ ‭Including: Roads, railways, telecommunications, schools‬
‭○‬ ‭These are essential for private businesses to be able to run efficiently e.g roads‬
‭necessary for transport‬
‭●‬ ‭Capital equipment can significantly increase the‬‭productivity‬‭of other resources e.g machinery‬
‭improving productivity of labour - this is especially beneficial for the economy‬
‭●‬ ‭Therefore the amount of capital available has a significant impact on future economic growth‬
‭●‬ ‭Reward‬‭for capital is interest - When entrepreneurs‬‭borrow money from a bank in order to invest‬
‭in capital, the bank is using funds from consumers who have chosen to put their money in that‬
‭bank. Entrepreneurs then PAY interest to the bank for their loans. This interest is given back to‬
‭the consumers who’s funds were used, meaning that the reward for capital is ultimately given to‬
‭consumers.‬
‭●‬ ‭For enterprises that invest their own money into capital, the opportunity cost of investing in‬
‭capital is the interest they would have received by saving that money‬

‭Enterprise‬
‭●‬ ‭Enterprise involves organising the other factors of production (natural resources, labour and‬
‭capital) for the purpose of producing goods and services‬
‭●‬ ‭The entrepreneur bears the risk of making decisions that manage these factors of production,‬
‭with the possibility of failure‬
‭●‬ ‭Reward‬‭for enterprise is profit, which is provided‬‭because the entrepreneur sets up a successful‬
‭business. This is earned on top of the entrepreneurs wages for their labour, rent for any land‬
‭they may own, and interest for any invested capital‬

‭2.2 The distribution and exchange of goods and services‬

‭ DP (Gross Domestic Product)‬ ‭is the total amount‬‭of goods and services produced by an economy in‬
G
‭one year. It also measures the total value of goods and services (which is the total income available to‬
‭distribute in an economy).‬
‭●‬ ‭The distribution of the total output produced is one of the‬‭main functions of the economic‬
‭system‬‭- assigning each individual a portion of the‬‭output is largely determined by how valuable‬
‭they were to this output‬
‭●‬ ‭Each of the four factors of production have different variables that determine how much they‬
‭contributed to the production of goods and services, and therefore conclude how much interest,‬
‭rent, wages or profit should be rewarded as a portion of the GDP‬
‭●‬ ‭Natural resources‬
‭○‬ ‭The value of natural resources may depend on the quality and scarcity of the resource‬
‭○‬ ‭E.g‬‭the owner of water in an area with water scarcity,‬‭will receive a significantly higher‬
‭reward than the owner of water in a water abundant area‬
‭●‬ ‭Capital‬
‭○‬ ‭The value of capital may depend on the quality, scarcity and usefulness of the resource‬
‭○‬ ‭E.g‬‭Modern machinery will have better quality (higher‬‭productivity) than older‬
‭machinery and so the owner will receive a higher reward‬
 ‭●‬ ‭Enterprise‬
‭○‬ ‭The value of enterprise is determined by how innovative an enterprise is‬
‭○‬ ‭If they are more innovative, they will contribute more to the GDP, and so the owner/s‬
‭will receive a greater reward‬
‭●‬ ‭Labour‬
‭○‬ ‭The value of labour is determined by how skillful the labour is and how scarce the labour‬
‭is‬
‭○‬ ‭A larger skill set will mean more contribution to the GDP and therefore more reward for‬
‭the individual. A greater skill set also means high demand and lower supply, which raises‬
‭the reward even more‬
‭○‬ ‭This encourages future labour to acquire greater skill sets - This will be beneficial for the‬
‭economy as an increased valuable labour means an increased GDP‬

‭Disadvantages of the System‬

‭●‬ ‭There are some disadvantages of this distribution system, particularly in the labour sector‬
‭●‬ ‭A higher income is generally favourable in terms of quality of life and requires a greater skill set,‬
‭however it is not always achievable‬
‭●‬ ‭Certain barriers for some groups of people, including disabilities, illness and age‬
‭●‬ ‭Because they have an unfair advantage, the government intervenes in the distribution process to‬
‭provide these people with financial support. This is achieved by taxing high income earners and‬
‭redistributing to low income workers through social security payments (also reducing the gap‬
‭between the rich and poor)‬

‭2.3 The business cycle‬

‭●‬ T‭ he total value of all goods and services‬
‭produced in an economy over time is‬
‭presented as the business cycle‬
‭●‬ ‭The output of products is rarely constant‬
‭and fluctuations like economic booms‬
‭and recessions demonstrate this‬
‭●‬ ‭Most economies over time increase their‬
‭GDP output due to inevitable inflation -‬
‭the rate of increase is what can vary‬
‭●‬ ‭The line represents what we want the‬
‭pattern of GDP to look like‬

T‭ he business cycle‬‭refers to a cycle of booms and‬‭recessions which occur in the economy (businesses‬
‭play a significant role and are impacted heavily).‬
‭ ecessions‬‭are a period of temporary contraction in the economy which results in reduced spending,‬
R
‭unemployment and slow economic growth.‬‭Families are‬‭forced to rely on savings and social security‬
‭payments and as living standards fall, health problems increase, educational opportunities disrupted,‬
‭social issues rise. Together these diminish the quality of life.‬
‭Depressions‬‭are a more severe recession, resulting‬‭in business failures, high and sustained‬
‭unemployment, and falling prices.‬
‭A recession is when an economy contracts for 6+ months and a depression is a longer/severe recession‬

‭Contraction key features (recession)‬ ‭Expansion key features (boom)‬

‭-‬ F‭ alling production of goods and services‬ ‭-‬ I‭ ncreasing of goods and services‬
‭resulting in falling GDP‬ ‭resulting in increasing GDP‬
-‭ ‬ ‭Falling levels of income‬ -‭ ‬ ‭Rising levels of income‬
‭-‬ ‭Rising unemployment‬ ‭-‬ ‭Falling unemployment‬
‭-‬ ‭Decreasing consumer spending and‬ ‭-‬ ‭Increasing consumer spending‬‭(this is‬
‭business sales‬‭(this is due to the‬ ‭due to the increased consumer‬
‭decreased consumer confidence that‬ ‭confidence that occurs because of factors‬
‭occurs because of factors such as‬ ‭such as low unemployment, rise in‬
‭unemployment, drop in financial markets‬ ‭financial markets like housing)‬
‭like housing)‬ -‭ ‬ ‭Interest rates eventually rise‬
-‭ ‬ ‭Interest rates eventually fall‬ ‭-‬ ‭Rate of inflation rises‬
‭-‬ ‭Rate of inflation may fall‬

‭ ‬‭recession‬‭is‬‭caused‬‭by the lack of consumer spending‬‭that can be triggered due to a number of factors.‬
A
‭When consumer spending is low, businesses cut back on the amount of goods/services produced,‬
‭consequently cutting back on the production factors they employ. This raises the unemployment rate,‬
‭causing a decline in consumer confidence which further limits consumption. Eventually the economy will‬
‭fall into recession due to the lack of liquidity in the economy‬

‭ ‬‭boom‬‭is‬‭caused‬‭by high consumer confidence due to‬‭the stability of the economy, resulting in‬
A
‭increased consumer spending. This means businesses expand (high demand) and more factors of‬
‭production are employed which lowers the unemployment rate. Eventually there is high demand and‬
‭low supply, allowing competitive markets to push the prices up and cause inflation.‬‭Housing market‬
‭crisis‬
‭2.4 An overview of the economy: the circular flow of income‬

T‭ he‬‭circular flow of income‬‭demonstrates the connections‬‭between the five different sectors of the‬
‭economy: Consumers, Businesses, Financial Institutions, Governments and Overseas sector‬

‭Consumers‬
‭●‬ ‭Consumers are the owners of‬
‭all productive resources (land,‬
‭labour, capital and enterprise),‬
‭which they provide to‬
‭businesses and in turn receive‬
‭the appropriate reward (rent,‬
‭wages, interest, profit)‬
‭●‬ ‭Primary income comes from‬
‭wages, and consumer income‬
‭goes into savings, paying tax,‬
‭consuming locally produced‬
‭products, or consuming imports‬
‭●‬ ‭Leakages: Savings, Taxation,‬
‭Imports‬

‭Businesses‬
‭●‬ ‭Firms engaged in the production of goods and services by employing consumer resources‬
‭(engaging with the factors of production)‬
‭●‬ ‭Businesses rely on consumers to both‬‭produce‬‭and‬‭to‬‭sell‬‭their goods and services‬

‭Financial sector‬
‭●‬ ‭Plays an important role in bringing savers and investors together in order to increase economic‬
‭activity‬
‭●‬ ‭The‬‭leakage‬‭of savings caused by consumers, is redistributed‬‭to investors in order to‬‭inject‬‭that‬
‭money back into the economy‬

‭Governments‬
‭●‬ ‭Three levels of government: Commonwealth, State and Local‬
‭●‬ ‭It satisfies collective community wants such as roads, schools and parks and funds these through‬
‭taxation‬
‭●‬ ‭Taxation is a leakage as it decreases the disposable income for consumers and businesses,‬
‭however the government injects this money back into the economy by using it to fund several‬
‭government expenditures‬
‭○‬ ‭Tax is used to provide an income for government employees (injection)‬
‭○‬ ‭Tax is also used to fund social security payments such as pensions (injection)‬
‭○‬ ‭Both of these increase the level of economic activity‬
 ‭●‬ ‭Also referred to as the‬‭public sector‬

‭Overseas sector/International trade and flows‬

‭●‬ ‭Covers transactions that our economy has with the rest of the world including imports, exports‬
‭and international money flows (financial transactions such as borrowing and lending)‬
‭●‬ ‭Flows into our economy are considered injections while flows out of our economy are leakages‬
‭(Imports = leakages as money flows out of economy, Exports = injections as money flows into‬
‭economy)‬

‭Key Leakages‬ ‭Key Injections‬

‭ ‬ S‭ avings‬
● ‭ ‬ I‭nvestment‬
●
‭●‬ ‭Taxation‬ ‭●‬ ‭Government Expenditure‬
‭●‬ ‭Imports‬ ‭●‬ ‭Exports‬

E‭ QUILIBRIUM‬
‭Equilibrium‬‭occurs in the circular flow of income‬‭when the sum of all the leakages is equal to the sum of‬
‭all the injections of an economy‬
‭Disequilibrium‬‭occurs in the circular flow of income‬‭when the sum of all the leakages is not equal to the‬
‭sum of all the injections of an economy‬
‭A‬‭downturn‬‭in economic activity when - Leakages >‬‭Injections‬
‭An‬‭upturn‬‭in economic activity when - Leakages < Injections‬
‭The‬‭government‬‭can influence the total leakages and‬‭injections of an economy by:‬
‭-‬ ‭Changing levels of tax and government revenue‬
‭-‬ ‭Manipulated to offset any undesirable economic outcomes e.g‬‭controlling inflation by increase‬
‭leakages and reducing injections‬
 ‭CHAPTER 3: HOW ECONOMIES DIFFER‬

‭3.1 The Market Economy‬

‭Pure market economy‬
‭●‬ ‭Major economic decisions are made by individuals without government interference ‬
‭○‬ ‭Also known as capitalist, free enterprise, unplanned, laissez faire‬
‭●‬ ‭Power and wealth are concentrated into the hands of a few‬
‭○‬ ‭majority of the population receive low wages‬
‭○‬ ‭Economic imbalance, great divide between rich and poor‬
‭●‬ ‭Characteristics of a pure market economy:‬
‭○‬ ‭Private ownership of property ‬
‭■‬ ‭Both resources and goods are owned by private enterprises ‬
‭■‬ ‭They also have the right to sell or transfer ownership under any conditions ‬
‭preferable ‬
‭○‬ ‭Consumer Sovereignty ‬
‭■‬ ‭Free to choose how to spend their income, ultimately deciding what ‬
‭goods/services will be produced. This means consumers determine what is ‬
‭produced and how much of it is produced‬
‭○‬ ‭Freedom of enterprise ‬
‭■‬ ‭Businesses are free to produce what they want and individuals are free to ‬
‭purchase what they want ‬
‭■‬ ‭Freedom in all aspects of economic activity‬
‭○‬ ‭Competition‬
‭■‬ ‭Competition allows price mechanism to work effectively - A large number of ‬
‭buyers and sellers meaning that no single buyer or seller can take advantage ‬
‭(e.g‬‭In an economy with less buyers, it is possible‬‭for them to charge a greater‬
‭expense to maximise profits, at the consumers expense)‬
‭■‬ ‭Competition is a result of self-interest and the profit motive‬
‭■‬ ‭Owners and businesses compete for a share of the market‬
‭○‬ ‭Self Interest and the Profit Motive‬
‭■‬ ‭Individuals and Businesses both want to gain/keep as much money (this is what‬
‭is best for themselves)‬
‭■‬ ‭Businesses aim to maximise profits with cheap resources and higher selling‬
‭prices‬
‭■‬ ‭Individuals want the best quality and most quantity for the cheapest price‬
‭■‬ ‭The desire for profit/wealth it the‬‭ultimate motivation‬‭of the economy‬
‭○‬ ‭Limited Government Intervention‬
‭■‬ ‭The role of this type of government is allowing individuals and firms the‬
‭freedom to act in their own interest‬
 ‭■‬ M
‭ any goods and services desired by the community are not provided by this‬
‭type of economic system‬

‭The Modified Market Economy‬

‭●‬ ‭A market economy is modified by the government, but not completely controlled‬
‭●‬ ‭Characteristics of a Modified Market Economy‬
‭○‬ ‭Government becomes a producer‬
‭■‬ ‭Uses public authorities, public enterprises such as Australia Post and Public‬
‭Utilities (water, sewage, gas, electricity)‬
‭○‬ ‭Government alters income distribution through‬
‭■‬ ‭Personal income taxes‬
‭■‬ ‭Transfer payments‬
‭■‬ ‭Subsidies to business to increase their output‬
‭○‬ ‭Government regulates firms and markets‬
‭■‬ ‭The government has regulations on consumer products, prices, safe work‬
‭practices‬
‭○‬ ‭Management of the economy - governments use policies to control inflation,‬
‭unemployment, production output, debt and interest rates‬

‭The Planned Economy‬

‭●‬ ‭All decisions regarding production and distribution are made by the government‬
‭●‬ ‭Decisions are carried out by government bodies which issue orders to individuals, firms and‬
‭farms about what, how, where and when to produce‬
‭●‬ ‭Characteristics of a Planned Economy‬
‭○‬ ‭Public ownership of resources - state often owns and controls the means of production‬
‭■‬ ‭The ownership and control of resources is necessary if the government is to‬
‭produce and distribute all goods and services‬
‭■‬ ‭Private ownership is limited to family home, consumer durables and personal‬
‭items‬
‭○‬ ‭Limited individual economic freedom - freedoms are restricted‬
‭■‬ ‭Individuals can’t engage in any form of enterprise they choose‬
‭■‬ ‭There is an absence of private ownership of resources which limits private‬
‭economic activity and private profit‬
‭○‬ ‭Central planning - ownership and control of resources means the state can organise the‬
‭production and distribution of goods and services for the whole economy‬
‭■‬ ‭Coordination on a large scale is the key to central planning‬

‭3.2 Australia: A Market Economy with a Role for Government‬

‭●‬ C
‭ urrently, all economies contain some elements of planned and pure market economies (no ‬
‭economy is completely planned or pure)‬
 ‭●‬ T ‭ hey are referred to as ‬‭mixed economies: ‭A
‬ n economy where the decisions concerning ‬
‭production and distribution are made by both market forces and government decisions‬
‭●‬ ‭A key dilemma/ongoing question is what balance of market forces and government ‬
‭intervention is best for an economy‬

‭ hy do governments intervene in the market? Resource allocation, Income distribution, Economic ‬

W
‭stability‬‭‬
‭●‬ ‭Government intervention in production in order for the most ‬‭efficient allocation of ‬
‭resources across the economy‬
‭○‬ ‭There are certain goods and services that the private sector will not supply due to ‬
‭the undertaking or risk of providing such a facility e.g Australia’s railway system, ‬
‭parks, roads etc. - All these goods/services are beneficial to the whole community ‬
‭and are funded through taxes‬
‭○‬ ‭Sometimes for the purposes of security and internal stability it is better for the ‬
‭government to provide certain products e.g defence force‬
‭○‬ ‭Sometimes markets do not operate in the best interests of the whole economy - In ‬
‭this case the government provides regulations ‭p ‬ reventing‬‭enterprises from ‬
‭exploiting consumers ‬‭(May also ban undesirable products‬‭e.g illicit drugs)‬
‭●‬ ‭Government intervention in distribution of income (output) in order to provide ‬‭a socially ‬
‭desirable/fair distribution, ‬‭Done in 2 ways:‬
‭○‬ ‭Social welfare payments:‬‭Without government intervention‬‭people who do not ‬
‭contribute to the economy (elderly, unemployed, chronically ill) would receive no ‬
‭output/income. Therefore, the government taxes those with higher incomes to ‬
‭redistribute to the people who do not work in the form of social welfare payments ‬
‭(age pensions, disability pensions, unemployment benefits)‬
‭○‬ ‭Progressive Income Tax: ‭I‬n order to lower the gap ‬‭between high income and low ‬
‭income earners, there is a progressive taxing system in which people with higher ‬
‭incomes are taxed a higher rate of their total income. This allows the redistribution ‬
‭of total income‬
‭●‬ ‭Government intervention is also done to smooth out fluctuations caused by the business ‬
‭cycle, and during major economic/financial problems‬

‭How the mixed economy aims to solve the economic problem‬

‭●‬ ‭In a mixed economy the answers to the four economic questions are mainly determined by ‬
‭the operation of markets - The government can therefore intervene ‬
‭●‬ ‭What to produce?‬
‭○‬ ‭The government can be a producer itself, particularly for things used by the ‬
‭community‬
‭○‬ ‭It can encourage other forms of production through subsidies, tax incentives, ‬
‭start-up funding‬
‭○‬ ‭It can also limit the production of certain goods (e.g illicit drugs)‬
 ‭●‬ ‭How much to produce?‬
‭○‬ ‭Can limit the production of goods and delivery of services e.g regulation on number ‬
‭of taxi licences distributed ‬
‭○‬ ‭Can encourage greater production of products that are desirable but limited e.g ‬
‭government subsidies for the arts, education, renewable energy‬
‭○‬ ‭Encourage Australian producers to increase production by imposing import ‬
‭restrictions or granting subsidies to Australian producers‬
‭●‬ ‭How to produce?‬
‭○‬ ‭Can influence the cost of factors of production as there are certain regulations that ‬
‭mean firms may not be able to go with the cheapest method of production ‬
‭(minimum wages, safety regulations, environmental controls)‬
‭●‬ ‭How to distribute production?‬
‭○‬ ‭Government intervention in redistribution of income‬

‭3.3 Comparing Economies‬

‭●‬ T ‭ raditionally Australia has been compared with advanced industrialised economies, ‬
‭reflecting Australia’s cultural/historic ties with the Western World - Importance of economy’s ‬
‭level of industrialisation to other economic features (living standards, patterns of ‬
‭employment)‬
‭●‬ ‭Reasons for analysing Australia amongst its ‬‭economic‬‭region - Asia‬‭:‬
‭○‬ ‭Trading relations are mainly with Asian economies ‬
‭○‬ ‭Australia’s strong economic performance through late 2000s while Europe and ‬
‭America were down - Showed us that Australia is more linked to Asian economies ‬
‭than Western ‬
‭○‬ ‭Recent shifts in Asian economies (higher living standards/market-oriented ‬
‭economies) allows us to make meaningful comparison and analysis ‬
‭●‬ ‭Region of Asia is diverse in economies‬
‭○‬ ‭Full spectrum from large and powerful, to small island economies ‬
‭○‬ ‭Includes wealthy as well as less developed economies ‬
‭○‬ ‭Some of the fastest growing and slowest growing economies ‬
‭○‬ ‭From extreme left to extreme right economies‬
‭○‬ ‭This differentiation is a result of industrialisation ‬
‭●‬ ‭Australia may have some features similar to one economy, and other features similar to ‬
‭another Asian economy, as all Asian nations are completely different ‬

‭Five Areas of comparison:‬

‭-‬ ‭Economic Growth and the Quality of Life‬
‭-‬ ‭Employment and Unemployment ‬
‭-‬ ‭Distribution of Income‬
‭-‬ ‭Environmental Sustainability ‬
‭-‬ ‭Role of Government in Health Care, Education, Social Welfare‬
‭Two types of Asian economies:‬
‭-‬ ‭Advanced: Japan, South Korea, Singapore‬
‭-‬ ‭Emerging and Developing: Indonesia, Malaysia - China, India‬

‭Economic growth and quality of life‬

‭●‬ ‭By world standard Australia sits outside the top 10 economies measured by GDP, however in ‬
‭Asia it is the 5th largest economy ‬
‭●‬ ‭China, Japan, India, South Korea, Australia and Indonesia are all part of the G20 (The top 20 ‬
‭economies)‬
‭●‬ ‭The ‬‭Asian economic region‬‭has been the fastest growing‬‭since WWII, following Japan’s rapid ‬
‭industrialisation (1950s -60s) + a second wave of industrialisation (1970s-80s) ‬
‭●‬ ‭Asian ‘Tiger’ Economies:‬‭SK; Singapore; Hong Kong;‬‭Taiwan Growth strategies‬
‭○‬ ‭Relied on competitive labour costs and growing export markets‬
‭○‬ ‭These countries whose economies are capitalist, grew significantly faster than other ‬
‭communist/centrally planned economies in the Asia region‬
‭●‬ ‭Third major phase of economic growth in Asia‬
‭○‬ ‭Developing Asian countries have seen the fastest growth in the recent decades - ‬
‭annual growth of 7.2% over the past four decades ‬
‭○‬ ‭The ‘Tiger’ countries which achieved industrialisation sooner, have a rate of 5.3% ‬
‭AND Japan has slowed to 1.8%‬
‭○‬ ‭This clearly shows that during industrialisation a nation’s economic growth is ‬
‭comparatively fast before it slows down again‬
‭○‬ ‭Convergence‬‭is when less developed economies grow ‭a ‬ t a faster rate to catch up to ‬
‭wealthier economies‬
‭●‬ ‭How does Australia’s economic growth compare with the rest of Asia?‬
‭○‬ ‭Australia is significantly different as it achieved industrialization before WWII (Before ‬
‭Japan), meaning there has not been rapid economic growth in recent decades‬
‭○‬ ‭Average annual growth rate is 2.9% over the last four decades‬
‭■‬ ‭Slower than most Asian economies‬
‭■‬ ‭Faster than most advanced worldwide economies‬
‭○‬ ‭Australia faced severe economic downturns in the late 80s and early 90s, however ‬
‭during the Asian financial crisis of the late 90s, it achieved stable growth - ‬‭Because it ‬
‭was not as integrated with the Asian ‘Tiger’ economies‬
‭○‬ ‭In the late 2000s global economic crisis Australia managed to stay out of an ‬
‭economic depression - ‬‭Because of its booming trade‬‭relationship with China‬
‭○‬ ‭During covid Australia was not hit as hard as other Western countries - ‭B ‬ ecause of its ‬
‭relations with faster-growing Asian economies‬‭‬
‭○‬ ‭Up until now Australia’s economy has thrived due to its close relationship with fast ‬
‭growing Asian countries, however Australia’s strong relation with China also puts ‬
 ‭ ur economy at risk because if an economic problem occurs in China, it will affect ‬
o
‭Australia negatively ‬
‭■‬ ‭Australia needs to diversify trade relations and export to a range of countries ‬
‭“All eggs in the China basket?”‬
‭●‬ ‭Up until now the overall size of the economy has been discussed - We must now look at how ‬
‭economic outcomes for ‬‭individuals‬‭compare‬
‭○‬ ‭GDP/Capita = Total financial value of goods and services in a year ‬‭divided by‬‭‬
‭population of the economy‬
‭○‬ ‭Australia has the second-highest standard of living in Asia region (in terms of GDP)‬
‭○‬ ‭Quality of life‬‭is a measure of welfare that involves‬‭many factors other than gdp, ‬
‭including quality of healthcare, educational opportunities and climate ‬
‭○‬ ‭The ‬‭Human Development Index ‭i‬s a narrow measure of‬‭quality of life (income, life ‬
‭expectancy, adult literacy, educational levels) - Australia is ranked 4th and ahead of ‬
‭all Asian economies ‬
‭■‬ ‭However some aspects of life cannot be accurately measured such as ‬
‭climate, political rights/freedoms‬
‭Unemployment ‬
‭●‬ ‭In most major Asia-Pacific economies unemployment rates have been relatively low ‬
‭(Indonesia bringing it down over the last 2 decades‬
‭●‬ ‭COVID-19 resulted in all Asia-Pacific economies to have higher unemployment rates, ‬
‭however this increase was less significant than in other parts of the world‬
‭○‬ ‭As it is difficult to bring unemployment rates back , all governments invested in ‬
‭wage subsidies/business support schemes to keep as many people employed as ‬
‭possible‬
‭●‬ ‭Employment patterns‬‭are very similar in Australia ‬‭to other developed countries‬
‭○‬ ‭Majority of people employed in the service industry‬
‭○‬ ‭Manufacturing and construction prosper however agriculture is increasingly smaller‬
‭●‬ ‭This is most similar to Japan which has 5% in agriculture but more than 75% in services‬
‭●‬ ‭Other asian nations that are still in the industrialisation process have smaller (but ‬
‭increasing) service sectors and a substantial amount in agriculture‬
‭○‬ ‭Indonesia’s agriculture is approx. 30% down from 40% in 2010‬
‭○‬ ‭In the coming decades we will see a substantial increase in urban population and ‬
‭people moving from rural to urban areas (for service/industry work)‬

‭ istribution of Income‬
D
‭Income distribution is extremely important, ensuring most of the GDP does not go to a small group ‬
‭of people‬
‭●‬ ‭Pure economies often face a very uneven distribution ‬
‭●‬ ‭Agricultural developing economies may also face uneven distribution‬
 ‭○‬ T ‭ he wealthier part of society owns most land and as industrialisation occurs, the gap ‬
‭between the rich and poor is increasingly wider and worsening inequality as most ‬
‭increased GDP goes to the rich (without government intervention)‬
‭●‬ ‭Mixed economies allow governments to tax the wealthier and redistribute income to the ‬
‭poorer in order to have more equal groups in society‬
‭ ‬ ‭Economies in Asia are generally more unequal than developed economies in Europe‬
●
‭○‬ ‭Previously industrialised economies.g Australia, Japan, NZ have a more equal ‬
‭economy ‬
‭○‬ ‭Economies prioritising markets with little government intervention e.g Singapore, ‬
‭Hong Kong have a more unequal distribution ‬
‭○‬ ‭Economies with a gap between poor rural areas and wealthy urban areas, China and ‬
‭India are quite unequal ‬

‭ nvironmental Sustainability‬
E
‭Development being compatible with natural environment is now a key part of economic decision ‬
‭making‬
‭●‬ ‭Australia has superior environmental qualities in comparison to other Asian economies: less ‬
‭water, air pollution, more national parks, more efficient industrial processes‬
‭○‬ ‭E.g China’s industrialisation has created severe pollution problems towards both ‬
‭environment and health, Australia has a much cleaner environment ‬
‭●‬ ‭However compared to other industrialised countries Australia is still relatively poor‬
‭○‬ ‭Poor ‭p ‬ reservation of biodiversity‬‭with over 50 birds/mammals‬‭extinct in the last 2 ‬
‭centuries - Responsible for ⅓ of species extinctions around the world during that ‬
‭period - 1700 more species at risk of extinction‬
‭○‬ ‭Australia makes good use of its water resources which are measured by water ‬
‭productivity, however water disasters (droughts, bushfires, shortages) indicate larger ‬
‭water resource management problems ‬
‭●‬ ‭A significant environmental issue that all of Asia region is facing - ‭c‬ limate change‬
‭○‬ ‭2020 hottest year recorded, thickness of Arctic ice decreasing by 40% since 1960, ‬
‭more frequent extreme weather events‬
‭○‬ ‭An estimated increase of temperature in the next century - 1.0-5.4 degrees‬
‭○‬ ‭This is ‭e‬ xtremely detrimental to Asian economies‬‭due‬‭to low level coastlines and ‬
‭extreme weather conditions‬
‭○‬ ‭2015 UNFCCC in Paris - agreement of nearly 200 countries to tackle climate change ‬
‭- For the first time it included the involvement of developing nations such as India ‬
‭and China‬
‭■‬ ‭This agreement involved transparency while encouraging countries to meet ‬
‭their contributions‬
‭■‬ ‭Australian Government was criticised for being reluctant in agreeing to ‬
‭reduce carbon emissions‬
 ‭○‬ ‭What is Australia doing?‬
‭■‬ ‭Goal to reduce emissions by 26-28% by 2030‬
‭■‬ ‭Per person carbon emissions are almost 16 tonnes (50% more than Japan, ‬
‭over 100% more than across Asia-Pacific region)‬
‭○‬ ‭All Asian economies face unique problems in terms of climate change and there is no ‬
‭single way to determine environmental sustainability ‬
‭■‬ ‭Indonesia - destruction of forests ‬
‭■‬ ‭China - largest emissions of an economy ‬
‭■‬ ‭India - Most polluted cities‬
‭■‬ ‭Small islands - Polluting through ocean ‬

‭ he role of the government‬

T
‭To what extent should the government be involved in the economy?‬
‭●‬ ‭Governments can be involved in several ways:‬
‭○‬ ‭Directly ‬‭involved in what and how an economy produces‬‭‭t‬ hrough‬‭government owned ‬
‭businesses, setting price levels, imposing rules/regulations‬
‭○‬ ‭Less direct‬‭actions include taxes, subsidies, measures‬‭encouraging resource ‬
‭movement amongst sectors‬
‭●‬ ‭The government's involvement is measured through its role in providing key services such as ‬
‭healthcare, education, social welfare‬
‭●‬ ‭Second half of twentieth century - Role of the government in Asian economies was ‬
‭influenced by whether it was a planned or market economy ‬
‭○‬ ‭Market economies - Japan, Korea, Singapore, Indonesia ‬
‭○‬ ‭Planned economies - China, Vietnam, India, Cambodia‬
‭●‬ ‭These divisions have become less significant over the last 3 decades as markets economies ‬
‭have introduced more government involvement and planned economies have eased ‬
‭government restrictions - During this time market governments have intervened to promote ‬
‭export and industrialisation ‬
‭●‬ ‭Australia is more similar to the market economies of East Asia‬
‭○‬ ‭Australia’s economy is capitalist and has always been primarily market in key sectors ‬
‭such as agriculture, mining, construction and manufacturing ‬
‭○‬ ‭Because Australia is mixed, government roles are primarily in the services sector: ‬
‭telecommunications; aviation; banking and insurance ‬
‭○‬ ‭In recent decades the role has reduced through ‭d ‬ eregulation‬‭‬‭and ‭p
‬ rivatisation‬‭of ‬
‭government businesses‬

‭How do we measure the extent to which the government has a role in the economy?‬
‭●‬ T
‭ he Index of Economic Freedom uses 10 indicators of how governments intervene - Australia ‬
‭was ranked the 3rd free-est country - Asian countries were amongst the top and also at the ‬
‭bottom (showing the diverse market in the Asia Region)‬
 ‭ ‬ ‭Private property rights‬
○
‭○‬ ‭Government regulation of the economy‬
‭○‬ ‭Spending on welfare ‬
‭○‬ ‭Australia was behind Singapore and NZ, Ahead of Japan and South Korea ‬
‭●‬ ‭Another way to measure the role of government in Australia and compare ‭-‬ ‬‭Percentage of GDP‬‭‬
‭spent by the government‬‭and collected in taxation ‭r‬ evenues ‬
‭○‬ ‭High levels of government spending indicate a more planned economy ‬
‭○‬ ‭In 2018 government expenditure was 37% of GDP ‬
‭ ‬ ‭We can also determine the role of government by examining the provision of health and ‬
●
‭education services ‬
‭○‬ ‭Comparing to Asian economies, Australia has a well developed medicare system ‬
‭whereas most Asian countries have less developed public health care and in some ‬
‭countries needing to rely on private health care‬
‭○‬ ‭Australia’s expenditure on health and education is high compared to most Asian ‬
‭countries, and similar to industrialised nations such as Japan‬
‭○‬ ‭There are high academic results in developed Asian nations, however low results in ‬
‭lower-income economies regardless of cultural emphasis on education - in theses ‬
‭economies private education plays a more significant role , especially post-secondary‬
‭○‬ ‭Private education:‬
‭■‬ ‭Sometimes a lower spending on education may reflect reliance on private ‬
‭education e.g in Japan and South Korea‬
‭■‬ ‭In lower-income economies, the low distribution of GDP towards education ‬
‭simply means high competition for scarce government resources‬
‭○‬ ‭Overall, Australia's level of ‬‭government funded education‬‭is considerably higher‬‭than ‬
‭the average level in Asian nations‬
‭●‬ ‭Social welfare‬‭means ensuring a minimum standard of‬‭living for people who are unable to ‬
‭work or looking for work‬
‭○‬ ‭Welfare benefits include: age pension, unemployment benefits, disability support ‬
‭payments, family payments, paid maternity leave‬
‭○‬ ‭Australia’s social welfare system provides much greater support than in Asian ‬
‭countries‬
‭○‬ ‭Australia’s spending on pensions makes up a 4.2% of the GDP and is higher than ‬
‭most other Asian economies (India 1.3%, Korea 3.0%), however Japan’s spending is ‬
‭considerably high - 9.4%‬
‭○‬ ‭The future of social welfare‬
‭■‬ ‭As more Asian countries become industrialised, the need for social welfare ‬
‭will increase ‬
‭■‬ ‭Contradicting this, Australia is looking to limit social welfare by restricting ‬
‭eligibility - With superannuation funding needs for people in retirement, it ‬
‭may soon replace traditional pensions ‬
 ‭■‬ A
‭ ustralia faces pressure to sustain its social welfare system for an ageing ‬
‭population, without having to increase taxes while ensuring adequate ‬
‭resources for other important spending (health care, education, ‬
‭infrastructure)‬

‭Australia and Asia comparison summary table‬

E‭ conomic growth and the‬ -‭ ‬ ‭ dvanced Asian economies and Australia are all in the G20‬
A
‭quality of life‬ ‭-‬ ‭The Asian economic region has been the fastest growing since‬
‭WWII due to recent industrialisation, however Australia‬
‭industrialised much earlier‬
‭-‬ ‭Australia has slower economic growth than most Asian economies‬
‭(with the exception of Japan)‬
-‭ ‬ ‭Australia is ahead of all asian economies for the HDI‬
‭-‬ ‭It’s integration with Asian economies has helped during covid-19‬
‭and 2008 crisis due to fast their fast economic growth‬
-‭ ‬
HI ESHA‬
‭

‭Unemployment‬ ‭-‬ ‭ nemployment rates for major Asia-Pacific economies are‬

U
‭relatively the same (indonesia bringing theirs down over the last 2‬
‭decades)‬
‭-‬ ‭Employment‬‭patterns‬‭however vary‬
‭-‬ ‭Australia is more similar to developed countries that have‬
‭majority of people employed in the service industry e.g‬
‭Japan‬
‭-‬ ‭Most other Asian nations are still industrialising and so‬
‭have smaller but increasing service industries‬

‭Distribution of income‬ ‭-‬ ‭ sian economies are generally more unequal than previously‬
A
‭industrialised economies like Australia, Japan and NZ‬
‭-‬ ‭The unequal economies have little government intervention such‬
‭as Singapore and HK‬

‭Environmental sustainability‬ ‭-‬ ‭ ompared to Asian countries, Australia has less water/air‬
C
‭pollution, more national parks, efficient industrial process‬
‭-‬ ‭Compared to other developed countries, Australia has poor‬
‭preservation of biodiversity, water management problems‬
‭-‬ ‭Climate change is a major issue in different ways for every Asian‬
‭economy e.g low level coastlines, extreme weather conditions,‬
‭natural disasters‬
‭-‬ ‭Every economy contributes in some way‬

T‭ he role of the government‬ ‭-‬ ‭ ustralia is a mixed market economy, meaning it is similar to‬
A
‭in health care, education,‬ ‭Japan, Singapore etc and less similar to planned economies like‬
‭and social welfare‬ ‭China and India‬
 ‭-‬ ‭ ccording to the Index of Economic Freedom, there were Asian‬
A
‭countries at the top and the bottom‬
‭-‬ ‭Australia was 3rd, behind Singapore and NZ but in front of‬
‭Japan and South Korea‬
‭-‬ ‭Health and education services‬
‭-‬ ‭Compared to Asia, Australia has a developed medicare‬
‭system - some Asian countries need to rely on private‬
‭health care‬
‭-‬ ‭Australian expenditure (education & health) is higher than‬
‭most, similar to Japan‬
‭-‬ ‭In Asian economies private education plays a significant‬
‭role due to lower government spending on education -‬
‭this is not the case in Australia‬
‭-‬ ‭Social Welfare‬
‭-‬ ‭Australia’s social welfare system provides much greater‬
‭support than in Asian countries‬
‭-‬ ‭Aus - 4.2% of GDP on pensions‬
‭-‬ ‭India 1.3%, Korea 3.0%‬
‭-‬ ‭However Japan is 9.4%‬
‭-‬ ‭Australia is looking to limit social welfare, whereas‬
‭industrialising countries will need to increase social‬
‭welfare‬

‭GLOSSARY‬

‭The economic problem‬ ‭How to satisfy unlimited wants with a limited number of resources‬

‭Collective wants‬ ‭Wants desired by the whole community e.g parks, libraries‬

‭Individual wants‬ ‭ ants desired by an individual, providing some form of pleasure when‬
W
‭consumed‬

‭Complementary wants‬ ‭Wants that come with the initial want e.g car - petrol‬

‭Recurring wants‬ ‭Wants that consumers need continuously e.g food, clothes‬