All of us undertake some form of activity in the economy on a daily basis. You may have consumed breakfast cereal that was purchased from a supermarket; you may have purchased a ticket for a bus, train or tram; you may have been driven to school in a car using fuel and driving on roads provided by the government; or you may have walked through gardens that are maintained by your local council or municipality. At school, students will be provided with a service (education) that is produced by either the government or a private organisation. Indeed, you may even be consuming telecommunication services as you text a friend or download an App during one of your classes!!
All of these activities, and numerous others that take place every single day, can be described as economic activity. This is activity that takes place in order to make our lives more enjoyable and/or activity that is designed to help us achieve our goals or to complete our daily chores. The economic activity that we engage in will involve numerous transactions – which typically involve the exchange of money for something in return. For example, the bus ride to school will have required a payment to the bus operator and the use of SMS texting services requires a payment to the telecommunications provider.
All transactions that we undertake, or indeed all economic activity, naturally take place in an economy. An economy exists in any place or region around the world where production of goods and services takes place, expenditure on those goods and services occurs and income is made from the selling of those goods and services.
At this introductory stage, think about production as the process of making a good or services, such as producing a car; income as the money given to those involved in the production of goods and services, such as wages; and expenditure as the spending of income on goods and services.
[If you have a spare 12 minutes, watch the video below produced by ‘CrashCourse Economics. While references are US based, it has relevant applications in the Australian context.]
Course notes quick navigation
1 Introductory concepts 2 Market mechanism 3 Elasticities 4 Market structures 5 Market failures 6 Macro economic activity/eco growth 7 Inflation 8 Employment & unemployment 9 External Stability 10 Income distribution 11.Factors affecting economy 12 Fiscal/Budgetary policy 13 Monetary Policy 14 Aggregate Supply Policies 15 The Policy Mix