applied econ first quiz Flashcards
“oikonomia” greek word literally means
household management
the study of the ways individuals and societies allocate their limited resources to satisfy unlimited wants
economics
aspects of economy
- science that is concerned with human behavior
- it is concerned with decisions we make and the consequences of those choices
- it is concerned with man’s material happiness
SOCIAL OR APPLIED SCIENCE:
it uses scientific method to build theories that can help explain the behavior of different groups, organization and individuals in the society
SOCIAL SCIENCE
SOCIAL OR APPLIED SCIENCE
involves application of economic theories and principles to real world situations which aim at predicting potential outcomes
APPLIED SCIENCE
APPLIED OR SOCIAL SCIENCE
uses scientific methods in its explanations which consists of observing the reality, presenting questions and problems to arrive at the formulating of theories and models
APPLIED SCIENCE
APPLIED OR SOCIAL SCIENCE
concerned with human behavior and the relationship between ends and scarce means which have alternative uses
SOCIAL SCIENCE
follows a systematic procedure to solve issues and problems of the society
APPLIED SCIENCE
deals with the behavior of individual components as economic agent such as household, consumer, worker, firm, and owner of production
microeconomics
deals with the behavior of economy as a whole with the view to understand the interaction between economic aggregates
macroeconomics
basic categories of inputs used to produce goods and services, FACTORS OF PRODUCTION
economic resources
refers to all natural resources used in the production process
land
all physical and mental efforts that people make available for production
labor
all investment goods used to produce other goods and services
capital
special ability an individual needed to develop and produce products and services like organizational and managerial skills
entrepreneurship
it means not enough supply to meet human needs and wants, and a condition in which human wants are often greater than the available supply
scarcity
two types of scarcity
relative
absolute
relative
circumstances
absolute
absolute scarce that need to rely on import
4 main questions
what to produce
how to produce
from to produce
what provision should be made for economic growth
goods and services must ba based on the needs of the consumers
what to produce
the system must select the proper combination of economic resources in produce the right amount of output
how to produce
distribution of goods that are produced and for which that they be distributed properly
from whom to produce
society would not like to use all its scarce sources for current consumption only
what provision should be made for economic growth
the means through which society determines the answer to basic economic problems
economic system
decisions are based on traditions and practices upheld over the years and passed
traditional economy
authoritative system, decision making is centralized in the government, decision are imposed on the people who do not have a say in what goods are to be produced
command economy
most democratic form of economic system, decisions are made on what goods and services to produce
market economy
combination command and market economy, protects private property, consumer and environment
mixed economy
4 basic economic problem of the country
unemployment
poverty
quality of infrastructure
income inequality
4 basic economic problem of the country
unemployment
poverty
quality of infrastructure
income inequality
main cause of unemployment
overpopulation
rural urban migration
direct government policies to keep the price of essential products is a solution to
poverty
encourage local and international investment through provision of attractive investment opportunities like tax incentives is a solution to
unemployment
lesser budget allocation, bottlenecks, quality and timeliness of services is a cause to
quality of infrastructure
government shall implement fiscal reform program is a solution to
quality of infrastructure
political culture, “palakasan and utang na loob system” is a cause to
income inequality
demand for a good or a services by an individual, interaction of an individual’s desires with the quantities of goods and services
individual demand
individual demand is also called as
household demand
what a buyer pays for a unit of goods or services
price
TOTAL NUMBER of units purchased at that price
quantity demand
TABLE that show the quantity demand of each price
demand SCHEDULE
shows the RELATIONSHIP between price and quantity demanded
demand curve
price increases, quantity demand decreases vice versa
law of DEMAND
obtained by adding together all the individual DEMANDS of all the household in the economy
market demand
slope of market demand is
downward
total quality of good or services that all producers are willing to supply
market supply
obtained by adding together the individual supply of all the firms in the economy
market supply
price increases, quantity supplied increases
price decreases, quantity supplied decreases
law of supply
achieved at the price at which quantities demanded and supplied are balanced and equal
supply and demand curves intersect
market equilibrium
quantity supply is greater than quantity demand
surplus
quantity demand is greater than quantity supply
shortage
what a buyer pays for a unit of goods or services
price
ability fo buy what you want
acts a signal for shortages and surpluses which help firms and consumers respond to changing market condition
purchasing power
excess quantity demand
shortage
excess in supply, amount of something left over when requirements have been met
surplus
price will tend to rise, discouraging demand and encourage firms to try and increase supply
good is in shortage
market equilibrium is also known as
market price
determinants of demand
income
population
taste and preference
price expectations
price of related
determinants of supply
technology
cost of production
number of sellers
taxes and subsidies
weather
producer can sell all the units he wants to produce vice versa
equilibrium price
all other things are equal or constant
the cetris paribus assumption
measures the responsiveness of the quantity demanded or supplied of a good to a change in it’s price
price elasticity
the absolute value of coefficient of elasticity is GREATER than 1
% Ed > % P
elastic
change in determinant will lead to a proportionately lesser change in demand or supply
less than 1
% Ed < % P
inelastic
change in determinant will lead to a proportionately EQUAL change, absolute value is equal to 1
unitary elastic
computed by choosing two points in the demand curve and comparing the percentage changes in quantity and price of those two points
arc elasticity
good is non essential
elastic
good is essential
inelastic
suggesting proportionate changes in quantity demanded and price
unitary elastic
relationship between changes in QD for a good and a chance in real incomr
income elasticity of demand
a positive sign for IE signifies good demanded which is what a consumer tends to buy more when income increases
normal good
negative sign indicates the demand for _____ which goods that are brought when income are low because low income prevents consumer from buying
inferior goods
measures how the QD changes as the price of related good changes, measures responsiveness of the demand of good to the change in price of substitute
cross price elasticity
positive sign which means the price of the substitute good increases, demand for other good will increase
substitute
negative sign indicates goods will increase if the price of a complement decreases
complement goods
response of quantity offered for sale every change in price
price elasticity of supply
goods that are easy to produce have _____ supply
elastic
goods that are hard to make are _____ supply
inelastic
small percentage change in price brings about a change in quantity demand from zero to infinity
perfectly elastic
any change in price will not have any effect on the demand of the product
perfectly inelastic
