#1.1 : Revisiting Economics as Social Science & Applied Science Flashcards
What is economics?
It is the effective management of scarce resources to satisfy human wants and needs.
Why is it a social science?
Because it studies how people relate to one another and how they consume resources.
Why is it an applied science?
Because economics can be used/applied in real-world situations.
What does Adam Smith’s book states?
It states how the movement of people can greatly affect the environment and one another.
What are some of the concepts introduced by Adam Smith?
invisible hand (let the people be), free market, capitalism, and laissez-faire
What is scarcity and why is it different from shortage?
Scarcity is the forever limitation of resources, while shortage only experience limited supplies in a certain period of time.
Difference of wants and needs.
Wants are things that give pleasure but isn’t essential, while needs are things that are important for survival.
4 limited resources
land, labor, capital, and entrepreneurship
It is the process of creating goods and services.
Production
Why is money not a capital resource in economics?
Because it cannot produce goods or services. Capital only refers to tools, machinery, and other productive equipment in economics.
3 economic questions
What to, how to, and for whom to produce
3 economic systems
Market (private), Command (government), and Mixed (both)
Difference of decision-making and rationality.
Decision-making determines how individuals or groups of people behave given certain changes in the
economy, while rationality assumes that individuals are consistent and logical in their decision-making.
Difference of opportunity cost and trade-off.
Opportunity cost is the cost of giving up an alternative when making a choice, while trade-off results in either satisfaction of dissatisfaction.
It is the sustained elevation of an entire society and social system toward a better and more humane life.
Economic development
3 core values in economic development
sustenance, self-esteem, and freedom
Difference of Positive and Normative economics
Positive economics is the principle that only which describes what exists and how things work, while Normative economics and makes judgements, and proposes courses of action.
It is a theory that believes that the population will increase at a rate that will exceed food supply.
Malthusian Theory by (Thomas Robert Malthus)
Difference of theory and model.
A theory is a proposition about certain related variables that explains a certain phenomenon, while model is a framework or representation of significant principles and describes how variables are related.
They help economists manage information and simplify economic processes so they could be easily understood and studies.
Assumption in economics
What are the 4 assumptions?
Rationality, Profit Maximization, Perfect Information, and Ceteris Paribus
It is a faulty reasoning that often make us commit errors in judgment or conclusions.
Fallacy
What are the 4 fallacies?
Failure to hold things constant under ceteris paribus, Post hoc Fallacy, Fallacy of Composition, and Sweeping Generalization
It is a graph that shows the greatest sum of outputs given accessible inputs or resources in an economy.
Production Possibilities Frontier (PPF)
It considers that it is most advantageous for economies to specialize in industries where they enjoy an advantage in resources and production processes.
Comparative Advantage
It is the exchange of products and resources among countries and is a significant aspect of economic development that has to be considered in an interconnected global economy.
International Trade
