“c01ThinkingLikeAnEconomist_PrintPDF” — 2022/7/18 — 23:09 — page 7 — #5
1.2 What is economics? KEY KNOWLEDGE • the two main branches of economics: microeconomics and macroeconomics • the two main forms of economic analyses: positive economics and normative economics
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Source: VCE Economics Study Design (2023–2027) extracts © VCAA; reproduced by permission.
1.2.1 Definition of economics
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‘Economics is what economists do.’ Some people may think that economics is all about money. While it can involve this, it is not always the case. So, let’s start with a basic definition.
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Economics is a study of human behaviour. It involves looking at the ways individuals, families, businesses, and governments make decisions or choices about how to use their limited resources to best satisfy their needs and unlimited wants, and in the process improve their wellbeing or living standards.
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Indeed, every day we make all sorts of decisions involving choices between alternative uses of our limited resources including time, skills and energy. For instance: • Should you and your friends go to a Taylor Swift concert (or some other music icon), or just stay at home? • Should you continue your education, or get a job? • Should you have a girlfriend or boyfriend, or just concentrate on your VCE? • Is it better for you to take risks and invest in shares, or leave your savings safely in the bank? • Should businesses produce mobile phones, hamburgers, jeans, uranium, or wool? • Should a firm advertise its products in newspapers, or use social media? • Is it better for a government to build new childcare centres, or put more resources into sport, roads, or national defence? • Does Australia benefit from free trade with other countries thereby encouraging competition from imports, or should we seek to be more self-sufficient in our production of goods and services and protect local industry? • Should mining be allowed on the Great Barrier Reef or on sacred Aboriginal sites, or should we value our cultural and natural environment more highly? In making these sorts of choices or decisions, economics also studies issues Economics is a study of human behaviour. It involves looking related to the production, consumption and distribution of goods, services, and at the way individuals, families, incomes. Essentially, in Australia’s economy or economic system, goods and businesses and governments services are produced or made using the limited resources that we have available. make decisions or choices about how to use their limited resources These resources are sold for money or income that is then used to buy or consume in ways that best help to satisfy those goods and services that best help to help satisfy our wants and improve our their basic needs and unlimited wellbeing, both now and into the future. wants. In making these sorts of Economics is such a broad study with many interesting fields and specialist areas like environmental economics, financial economics, the economics of international trade, economic history, the economics of health, education, welfare or population, economic history, public economics, and economic development in low-income countries.
decisions, economics also studies issues related to the production, consumption and distribution of goods and services. Economy or economic system helps to organise the production and distribution of goods, services and incomes.
TOPIC 1 Thinking like an economist
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