Basic Economics

Recognise the difference between a need and a want, and how these can change over time.	A Need is something that you cannot live without. A Want can be anything. The key difference between a Need and a Want is that wants are infinite and they can never be fully satisfied. Wants need to be obtained using resources and resources are limited. Therefore decisions, choices need to be made as to how you allocate your resources to obtain the things you want and forego the things you don’t want. Needs and Wants change over your lifetime due to changes in your age and lifestyle. They do not remain the same. As a baby you probably want for nothing and needs a few specific things. As a young professional you may need a laptop and broadband. As billionaire you may want to prevent death or travel into space, but you can only allocate your resources to one or the other.
Explain the central purpose of economic activity and what the key economic decisions are.	The central purpose of economic activity is the production of goods and services to satisfy needs and wants.
State the 3 main economic groups and the interactions between them.	The 3 main economic groups are: 1. Government 2. Business (firms) 3. Consumers (individuals but also the above two) Government and business are more concerned with the production of goods and services for consumers which can be individuals, but also other firms and Governments. Consumers are making choices as to how they allocate their resources (wage income, rental income, investment income or profits) to satisfy their needs and wants.
Understand the nature of an economic resource.	The nature of an economic resource is its characteristics. For example, most economic resources are scarce. Land being the most obvious example, to paraphrase Mark Twain “They aren’t making it anymore.“ But scarce in economic terms means that your resources are also scarce and that you have a choice in how you allocate it. There are limits so you have to decide, do you by the land, or do you invest your income elsewhere?
Identity and understand examples of the four factors of production and the reward accrued to each.	The four factors of production are: 1. Land 2. Capital 3. Labour 4. Enterprise The rewards that each gets are: 1. Land: Rental income from the use of the resource 2. Capital: Interest from savings or dividends from shares. 3. Labour: Wages or salaries in return for work. 4. Enterprise: The profits made from selling goods in excess of the cost to produce them,
Understand how and why choices are made, and how costs and benefits can be weighed up to make a choice.	Economic resources are scare which means they are finite. When deciding how to spend, or allocate your resources you have a choice over what to do. Making one choice means you forego the other choice you could have made. If you take the next best choice you could have made and evaluated the benefits that would have flowed to you had you made that choice, the loss is known as the opportunity cost. Making a choice therefore has a number of features. One is that you hope to benefit or gain from the choice, you weigh up the benefits and the opportunity costs. Once these factors are known a decision is made and the costs of the resource choice is incurred, and the opportunity cost of the other choices foregone is realised.
Understand the concept of opportunity cost in the context of economic activity.	Opportunity cost is the value of a choice that was not selected in favour of another choice. Each choice has costs and benefits and economists take into account the value of choices not made when making a cost benefit analysis of decisions made.