2.++Economic+concepts+and+theories

= 2. Economic concepts and theories =
 * 1) =Ms Stevenson will not be providing any more comments on this page 17 March 2011﻿=

**Your task** 1. Press edit above 2. Move your cursor below your name (scroll down) - only work in the area under your name 3. Use Ms Stevenson's exemplar as an example

**Miss Stevenson's exemplar:** (note you can not use my topic! Go to your task sheet for more topic examples.)


 * **My Economic problem**: || Grandma has $1000 to spend on a pedigree dog to provide companionship, exercise and security. ||
 * ** Scarcity: ** || Describe how scarcity applies to the above problem ||
 * ** Opportunity Cost: ** || Describe how opportunity cost applies to the above problem ||
 * ** Circular Flow: ** || Describe how CFM applies to the above problem eg which sectors are involved and which $ flows are involved ||
 * ** Any others ..... ** ||  ||


 * Cody B**


 * **My Economic Problem** || Buying the best apartment to suite my wants and needs. Apartment locations are Surfers Paradise, Broadbeach and Burliegh Heads. ||
 * **Scarcity** || Budget of $400,000. ||
 * **Opportunity Cost** || Buying a house in a suburban area or continue living at home with parents. And in the end, the apartments I do not choose. ||
 * **Circular Flow** || Consumer Expenditure, involves Household and Production Sector, the flow of Consumer expenditure and Goods/Services. ||
 * **Any others** ||  ||

Ms Stevenson: Cody: Good start - see comments above


 * Santiago C**

that are not overpriced. || their price or any other criteria. This will not only create opportunity cost of other shares, trusts and funds but also other investment opportunities. || into the production sector. Also, there will be involvement in the Production sector as my money will flow into this sector as my money will be invested in these companies. ||
 * **My Economic Problem** || I have $10,000 to invest in shares, trusts or funds. ||
 * **Scarcity** || I will have to choose which shares, trusts or funds in which to spend
 * **Opportunity Cost** || I will have to choose which shares, trusts and bonds in which to spend according to
 * **Circular Flow** || I will be involved in the financial sector of the circular flow model and take part in investments flowing
 * **Any others** ||  ||

Ms Stevenson: Santiago - good start
 * Ben C**


 * **My Economic Problem** || I have $500,000 to invest in a unit on the Gold Coast ||
 * **Scarcity** || Suiting units, ammount of money to spend ||
 * **Opportunity Cost** || leaving behind family and friends, moving problems and chosing the right unit ||
 * **Circular Flow** || He sits in the household sector, finding someone to help him with the purchase (production sector). Paying for the house, consumer expenditure, geting the unit, goods and services ||
 * **Any others** ||  ||

Ms Stevenson: Ben - get started!


 * Ben G**

[To cut back time here - think of a clever way of using a CFM graphic to quickly explain the options ...] || Future value: Ordinary Annuity:(can't seem to be able to paste image ; The economic concept of inflation will also have to be taken into account. ||
 * **My Economic Problem** || As a salary increase from $150,000 for the next 5 years, I have been given 3 possible packages and must choose the most appropriate option where my aim is to increase my long term savings. These are:
 * A straight increase in wages of $100,000 a year under a fixed contract which will be placed into a ANZ Long Term Deposit Account at 6.2% p.a.
 * The injection of the said $100,000 into a superannuation account of my choice (however I will stick to my current superannuation firm Australian Super) under a year-by-year negotiable package
 * A share package worth $100,000 a year which will invest in Rio Tinto shares. The price for the shares will be negotiated on a yearly basis. ||
 * **Scarcity** || In my retirement, I will want to be able to afford as many wants as possible. As my ability to effectively provide resources in the form of the factor of production labour can only be sustained until I retire, I need to maximise my income in order ensure that scarcity does not limit my capacity to enjoy my lifestyle during retirement. ||
 * **Opportunity Cost** || In choosing one of the options, the option which I deem second best will be the best alternative foregone when I make a economic choice and therefore will be my opportunity cost. ||
 * **Circular Flow** || Whilst I work I provide the factor of production labour to the Rio Tinto. In return I get income in the form of wages which allows me to buy goods and services.
 * Option 1 proposes that I take my salary increase as a straight wage. This will however not be used to buy goods and services and instead will become a leakage as savings though it will not be reinvested as the injection investment and will not used as consumer expenditure until I retire. However, as I will be significantly taxed on this wage which will be a leakage of income tax and then, theoretically, subsequently injected back into the economy by government expenditure. However, whilst my money is being saved, it will be utilised by the finance sector to provide borrowers with money which will in all likelihood be spent on goods and services
 * Option 2 will not provide any income tax for the government as it will not be taxed if I retire after 60. However, though this money will leak out as a saving, it will be near-immediately be injected as investment by my superannuation firm. This will boost the Australian economy and the production sector (the aim of Superannuation) for a number of years which, after I retire, will then be utilised as my source of income to buy goods and services from the production sector.
 * Option 3 will become a leakage both to the financial and government sectors. In regards to the government sector, this investment will be taxed under the Fringe Benefits Tax at 46.5% (45% and 1.5% Medicare Levy Ms Stevenson: isn't medicare part of your personal income tax?) which will be subsequently injected into the production sector as government expenditure. Furthermore, the other portion of this salary will be injected into the production sector as a form of investment. This will further benefit the production sector.
 * **Any others** || In order to determine future returns a series of equations will have to be utilised. Namely:

Ms Stevenson: Ben - terrific - try to start cutting back your words - remember you only have limited time - and you need to dedicate time to your decision - great research!


 * Michael G**


 * **My Economic Problem** || I have $10,000 to spend on a new car, however i don't want to spend more then $5,000, as i wish to have money left over for insurance and registration etc. ||
 * **Scarcity** || There is only a limited number of cars that are available and working, for under $4,000 ||
 * **Opportunity Cost** || the cars that i do not decide to choose, will be the oppurtunity cost. ||
 * **Circular Flow** || As i am in the household sector, and i will be receiving a car from the production sector, we will see a transaction of goods and services payed for by consumer expenditure. ||
 * **Any others** ||  ||

Ms Stevenson: Michael: Good start - see comments above


 * Max H**


 * **My Economic Problem** || A young married couple looking to buy a house and to stop renting, by buying an apartment with 3 beds they can start there family and have room for entertaining. ||
 * **Scarcity** || The amount of quality apartments around the central Brisbane suburbs is scarce, by following the requirements of the buyers. It is not easy to find a property between the 1.3 to 1.4 million dollars. ||
 * **Opportunity Cost** || The couple could continue renting in a similar area, evidently they could purchase a house in the suburbs which would give them more room for their kids. Though by doing this they would loose a greater aspect of their life, the fact that they are close to the city, transport and restaurant district of New Farm and a short trip to Fortitude Valley. ||
 * **Circular Flow** || Buy purchasing through a real estate agent in the Production sector and as a couple working in the household sector the money goes from the household to the production sector through Consumer Expenditure ||
 * **Any others** ||  ||

Ms Stevenson: Max: Good start


 * Eliot H**


 * **My Economic Problem** || Dad needs a 5-6m offshore boat. I'm trying to find one for $35,000. $40,000 is my max though my dad is willing to pay 50grand. ||
 * **Scarcity** || The boats that are priced in that range are either second hand or pretty old in model. ||
 * **Opportunity Cost** || To also suit my needs, I have given up on using the 50,000. This would mean giving up something more recent and something that is top-quality for my own christmas presents. Though I might be able to go on his fishing trips, I would prefer games instead. ||
 * **Circular Flow** || Seeing as these boats are made in Australia, they may be cheaper because they support the Australian production sector. Seeing as the boat is made here, I don't have to do anything and can use CE to buy it. I do not need to import anything thus causing tax problems and wasting time by waiting for the boat. ||
 * **Any others** || I may have a hard time in not suiting my needs compared to my father's. ||


 * Connor L**


 * **My Economic Problem** || A student who has just graduated from school and is entering his first year in university have been give $4000 from his parents to spend on a laptop to use at university in the coming years. ||
 * **Scarcity** || The is only a select number of computers that meet his specific criteria and there is only a select few of these that he like and would wish to purchase ||
 * **Opportunity Cost** || ﻿ ﻿The opportunity cost for going out and buying this computer is that the time spent researching which laptop is the best for this solution to his problem, the student could be out and enjoying his. The opportunity cost in regards to the laptops is which ever laptop the student decides to choose the second best computer is the opportunity cost because the student as had to forgo that laptop so that he may choose the laptop that he wants ||
 * **Circular Flow** || The purchasing of the computer is counted as consumer expenditure as a consumer, the student, is spending money on a product that the production sector has made, a laptop. Since the purchasing of this computer is consumer expenditure the consumer is putting money into the production sector and in return the student gets a good, a laptop. ||
 * **Any others** ||  ||

Ms Stevenson: Connor: Good start


 * Brendon L**

Although this is on a small scale, this sector also offers the goods (cars) that he (the consumer) may want to buy. The finance sector is also lending him money while he spends it. ||
 * **My Economic Problem** || A young person with $10000 wants to repay a car loan. ||
 * **Scarcity** || His starting money is scarce. ||
 * **Opportunity Cost** || If he decides to buy a certain stock, he may forgo a different one that may have different advantages/disadvantages ||
 * **Circular Flow** || By investing in the stock market, money is being invested into the production sector.
 * **Any others** || CBA, Risk/return, supply/demand. ||

Ms Stevenson: Brendon - get started!


 * Jacob M**


 * **My Economic Problem** || Having to much money and wanting to buy an investment apartment. ||
 * **Scarcity** || There is only three apartments to choose from and i only have a limited source of money. ||
 * **Opportunity Cost** || The Initial money could have gone on a house not an innercity apartment, which would off the advantages of a backyard and space. ||
 * **Circular Flow** || By spending my savings(leakages) on a house(CE) i will be contributing to the production sector by puchasing the house(G&S) ||
 * **Any others** || Risk of depreciation but also a chance for the property to rise in value ||

Ms Stevenson: Jacob - get started!


 * Ben M**

Well done ... is there one more flow you can mention that matches the CE ||
 * **My Economic Problem** || I only have $50,000 to spend on a boat between 20-30ft so that I don't have to keep renting one Has this $ amount changed from page 1? ||
 * **Scarcity** || I want a really big boat but I am only limited to $50,000 therefore I have to get one that will fit my budget ||
 * **Opportunity Cost** || With my $50,000, I could have spent it on a new car ||
 * **Circular Flow** || I am part of the Household Sector and have purchased the boat in Australia. Once the parts of the boat have been imported and have gone to the Production Sector, I will purchase the boat by using Consumer Expenditure (CE)
 * **Any others** ||  ||

Ms Stevenson: Ben: Good start


 * John N**


 * **My Economic Problem** || I have $15000-$25000 to spend on my first car. ||
 * **Scarcity** || I want the best quality car available, however my resource (money) is limited to $25,000. ||
 * **Opportunity Cost** || The opportunity cost will be the value of the best alternative car foregone. ||
 * **Circular Flow** || Each car is from a foreign car company. Once imported the car will be in the foreign sector. It will then be sent to the production sector, where I will,from the household sector, purchase it (CE) and be provided with a good (G&S). ||
 * **Any others** ||  ||

Ms Stevenson: John: Good start!


 * Stephen P**

Using labour to develop the house- creating income for the production sector
 * **My Economic Problem** || Write in your answers here and below ||
 * **Scarcity** || Limited Housing that matches my requirements ||
 * **Opportunity Cost** || Losing money for later retirement- car or house ||
 * **Circular Flow** || Investment- for the retirement

Where to you sit and what is your flow? ||
 * **Any others** ||  ||

Ms Stevenson: Stephen: Good start!


 * George R**


 * **My Economic Problem** || Write in your answers here and below ||
 * **Scarcity** || Shops may be sold out of the phone meaning I will have to find alternative options. This may mean I will either have to pay extra or less in order to accomodate my wants. Also, another source of scarcity is money limitations of $900. Limited amounts of phones to match my requirments. ||
 * Opportunity Cost || Paying the fee of the phone upfront as well as having to purchase 'phone credit' in order to effectively use the phone. The next best phone foregone will be the opportunity cost. ||
 * **Circular Flow** || The production sector produces the goods and services (mobile phone) and consumers pay to use these products- Household and production sector, CE on G&S which are produced by production sector. ||
 * **Any others** || n/a ||

Ms Stevenson: George: Well done ... go back and put in your Eco problem and fill in page 1


 * Laksith R**

cause me to buy the product from my current provider (Vodafone), or consider buying the phone from a different provider and paying them the unlocking fee which could be up to $100. || choose to buy, which would be decided in the decision-making matrix. || Expenditure (CE) on Goods and Services (G&S) produced by the Production Sector. ||
 * **My Economic Problem** || I have $700 to spend on a new smartphone for my personal use. ||
 * **Scarcity** || There would be a scarcity of unlocked smartphone on the market, which may
 * **Opportunity Cost** || The opportunity cost would be the next best alternative to what phone I will
 * **Circular Flow** || The flow between the Household and Production Sector with Consumer
 * **Any others** || n/a ||

Ms Stevenson: Laksith: Good start... go back and fix up page 1 and then you can keep going here


 * Jacob R**


 * **My Economic Problem** || Needing to invest around $200,000 into shares for future benefit as he is a retired 65 year old man living off superannuation. ||
 * **Scarcity** || Don't want to spend over $200,000. Scarcity applies to investment in shares, as obviously there are limited stocks that would be suitable for the desired outcome, and limited stocks that would be reliable and stable enough to invest such a large amount of money in. ||
 * **Opportunity Cost** || If he buys into for example NAB, then the opportunity cost is the next best alternative share which could have been purchased, that was foregone. This could be the other stock which he was looking to invest in, so for example the opportunity cost could be Commonwealth Bank. ||
 * **Circular Flow** || By investing, a transaction would occur injecting money into the production sector, through the foreign (financial sector) of the circular flow. ||
 * **Any others** ||  ||

Ms Stevenson: Jacob Good start... Just rethink CFM


 * Rushil R**


 * **My Economic Problem** || I have to select the best/cheapest phone plans for my cousin's situation/needs and satisfy his wants with the best choice available. ||  ||   ||   ||
 * **Scarcity** || Elder cousin wants a phone plan with 150 minutes of calls to others, and unlimited calling to his younger brother, whose plan also has to be purchased. Every boy loves games, social contacting so he also wants younger cousin to have a post-paid plan. But he cannot get all these things because he doesn't have enough money and even if desired, he will not be able to save for such a want. So under such a low budget, its best for him to stick with limited wants or needs only. ||
 * **Opportunity Cost** || Elder cousin could have decided on BYO plan (cheaper plans with post-paid/pre-paid sim cards because of no phones for the consumer/buyer) and purchased a cheap used mobile ($30-$50)and done same with younger cousin's phone necessities. This decision is best alternative foregone. ||
 * **Circular Flow** || This flow involves household and production sector. Production sector produces mobile phones and services to be sold to/consumed by a consumer in return of the goods and services provided. Production Sector earns a profit by the expenditure or the consumer benefits with the purchase. ||
 * **Any others** || Keeping in mind that elder cousin isn't earning but being paid by Centrelink for being unemployed! This involves the government in the circular flow as it is the source of providing the cousins with an income (not through production sector). ||

Ms Stevenson: Rushil - get started!


 * Benjamin S**


 * **My Economic Problem** || I have a budget of $700 per week to rent an apartment ||
 * **Scarcity** || Scarcity of reasonable costs of apartments in the city would make me look more into suburban apartments to suit my budget allowance ||
 * **Opportunity Cost** || suburban rent cost - easily affordable (approx. $400) so the difference can be spent on essential expenditure e.g. mobile, petrol, electricity etc. ||
 * **Circular Flow** ||  ||
 * **Any others** ||  ||

Ms Stevenson: Ben - get started!


 * Denton S**


 * **My Economic Problem** || My parents have a budget of $700,000 to spend on a house in america. ||
 * **Scarcity** || Scarcity of buyers in the US due to high unemployment and a poor economy. money is also scarce because they only have $700,000 to spend. ||
 * **Opportunity Cost** || Not buying a house in America in order to have more money to spend on traveling. ||
 * **Circular Flow** || This effects the **financial sector** when **savings (s)** from australia will be exchanged to the US, during this exchange there will be a small **tax (T)** ducuced from the dollar. In America the **Household Sector (my parents)** will buy a house, which is **comsumer expenditure (CE),** in order for the **production sector** to give them (**G&S**) which in this case is a house. ||
 * **Any others** || (Demand for housing in the US is very low due to the poor economy in America) ||

Ms Stevenson: Denton - good start but go back and have a look at scarcity and CFM


 * Adam S**


 * **My Economic Problem** || A young married couple have one child and they wish to have another but they must buy a bigger house as they have no room. ||
 * **Scarcity** || There are limited houses in the Wooloowin area with the correct requirements I am looking for, for the amount of money I am able to spend. ||
 * **Opportunity Cost** || I could rent in the same area and have more money to spend on holidays, cars or the kid's education but this would not secure my long term financial security. ||
 * **Circular Flow** || By buying a house, is spending their income as consumer expenditure which improves the production sector and ensure the flow of goods and services and resources. Before I buy my house I have also been saving which is apart of the financial sector and whilst I was saving, the financial sector would have been inevitably investing in the production sector but when I took this money out of the bank it is no longer injections or leakages but simply apart of the two sector flow of income. ||
 * **Any others** ||  ||

Ms Stevenson: Adam - good start but need to think about CFM


 * Jackson T**


 * **My Economic Problem** || To buy a house satisfying the needs and wants of the family. The house has to be under $1,000,000 ||
 * **Scarcity** || Money is definitely the main scarce resource involved ||
 * **Opportunity Cost** || By simply rebuilding or refurbishing the original damaged house, it would mean saving a lot of money to spend on the kids, going on holidays or on other wants or needs ||
 * **Circular Flow** || by buying the house, i would be re-injecting back into the household sector. Money would travel to the production sector after the selling of the house through consumer expenditure (CE), however, the production sector then gives back to the household sector in the form of the house. ||
 * **Any others** ||  ||

Ms Stevenson: Jackson - good start but need to think about CFM - you need 2 sectors and 2 flows ($ and/or other)


 * Ben T**


 * **My Economic Problem** || I have $10,000 to invest in shares that I hope will generate a healthy income for my retirement years. ||
 * **Scarcity** || My factor of production - labour is scarce as I am going into retirement. That is to say that I only have a limited amount of resources and i need to invest so that I will be able to satisfy my unlimited wants during my retirement years. ||
 * Opportunity Cost || If I invest all of my money in shares, I can't use my money for other shares or goods and services. ||
 * **Circular Flow** || My money will go into the finance sector and then eventually, it will reach the production sector where my chosen investee will benefit. The flows are from the household sector (that is me) into the finance sector in the form of saving. I then decide where I want the finance sector to invest my money in shares. The money, in the form of investment, then gets put into the production sector. The company that I have invested in will then be able to increase/improve production of goods to the household sector which will be representative of my perspective on society. ||
 * **Any others** ||  ||

Ms Stevenson: Ben - good start but need to think about scarcity - you need 2 flows ($ and/or other) in CFM


 * Zachary T**
 * **My Economic Problem** || I have $600,000 to spend on an investment property, generating enough money to cover myself when i am retired. ||
 * **Scarcity** || Limited properties that fall under my requirements for investment. ||
 * **Opportunity Cost** || If i invest my money in property i will be unable to invest in shares, trusts or funds. ||
 * **Circular Flow** || The housing sector will be effected when buying an Apartment or Home, money will flow from the housing sector into the production sector through consumer expenditure. Then money from the production sector will flow back into the Housing Sector due into income (wages) in order to pay for a Real Estate Agent. This in effect stimulates the economy. ||
 * **Any others** || n/a ||

Ms Stevenson: Zac - good start!