APPLIED ECONOMICS Flashcards
The study of how society manages its resources.
Economics
It is the study of choice under the conditions of scarcity.
Economics
Is a social science that deals with the two extremes: scarce resources and unlimited human demands.
Economics
It is a scientific study which deals with how individuals and society in general makes choices.
Economics
According to _______, Economics is the study of how society manages its resources.
Mankiw
_____ and ______ states that economics is the study of choice under the conditions of scarcity.
Hall, Leiberman
Economics, according to _____, is a scientific study which deals with how individuals and society in general makes choices.
Sicat
It is the understanding of how society allocates its resources under the condition of scarcity.
Economics
Is is defined as the limited nature of society’s resources.
Scarcity
It is when resources are being allocated in the most efficient manner.
Full Production
All employed resources are used so that they provide the maximum possible satisfaction of our material wants.
Full Production
Includes physical resources (land and capital) and human resources (labor and entrepreneurial ability).
Full Production
It is when a society’s available human resources are being maximized efficiently.
Full employment
It is a condition of an economy in which all qualified people who want to work can find employment at customary wage rates.
Full employment
Without it, there would be no need for production and distribution since the goal of economics is to suffice the consumer wants and needs.
Consumption
It is the ulitilization of a good or a service for one’s very own satisfaction.
Consumption
Economic resources are also know as ______.
Factors of production
What are the four factors of production?
Land, Labor, Capital, Entrepreneurship
The physical space on which production takes place, as well as useful materials – natural resources – found under it or in it, such as crude oil, iron, coal, or fertile soil.
Land
______ refers to the time and effort, both physical and mental, spent in producing goods or services.
Labor
This is also termed as human resources.
Labor
Capital has two economic types as a factor of production.
Physical capital and human capital
______ consists of things like machinery and equipment, factory buildings, computers and even hand tools like hammers and screwdrivers.
Physical capital
Refers to the skills and knowledge possessed by workers.
Human capital
The ability and willingness to combine the other resources – land, labor, and capital – into a productive enterprise.
Entrepreneurship
It is a condition of an economy in which all qualified people who want to work can find employment at customary wage rates.
Full employment
______ does not imply 100% employment since allowances must be made for frictional employment and unemployment and seasonal factors.
Full employment
It is what we must forego when we make a choice.
Opportunity cost
When making any decision, such as whether to attend college, decision-makers should be aware of the ______ that accompany each possible action.
Opportunity cost
It is the allocation of the total product (money incomes) among factors of production.
Distribution
In general theory, each unit of output corresponds to a unit of income.
Land – ______
Labor – ______
Capital – ______
Entrepreneurship – ______
Land – RENT
Labor – WAGES
Capital – INTEREST
Entrepreneurship – PROFIT
Since economics emphasizes on maximizing the scarce resources it concerns the production, distribution and consumption of goods and services. This is vital because once resources are improperly managed, people loses their opportunity to enjoy one’s benefit.
The concerns of economics
Due to the problem of scarcity, every ______ needs to function to satisfy societal needs.
economic system
Given such scarce resources, it believed that choices must be made regarding: ______, ______, ______
What to produce and how much of each commodity to produce.
How to produce it.
For whom to produce.
It refers to the way in which the resources of a country are used to produce goods and services, and the manner in which these goods and services are distributed for consumption.
economic system
An economic system is a mechanism which deals with the ______, ______ and ______ of goods and services in a particular society.
production, distribution, consumption
Different types of economic system.
Capitalist economy/Capitalism, Socialist economy/Socialism, and Mixed economic system.
The system under which economic system is controlled and regulated by the government so as to ensure welfare and equal opportunity to the people in a society.
Socialist economy/ Socialism
It is the system in which means of production are owned and managed by the government.
Socialist economy/Socialism
Eg: Cuba and North Korea
Socialist economy/Socialism
Is an economic system based on private ownership and the freedom of individuals to conduct their economic affairs without interference from government bodies or other groups.
Capitalism
A great deal of freedom of choice exercised by consumers and business firms in the market for commodities and resources.
Capitalist economic system
Eg: USA, Australia, Japan, Canada, etc.
Capitalist economy/ Capitalism
The capitalist economy is also known as the _______.
free exchange economy
Also known as free exchange economy.
Capitalist economy
Freedom to own property, freedom to buy and sell, and freedom from government interference in the economic aspect of each individual’s life.
Capitalist economy/Capitalism
Main Features of Socialist Economy: 5
•Economic, Social and Political Equality
•No Competition
•Positive Role of Government
•Work and Wages According to Ability and Needs
•Maximum Social Welfare
Main Features of Mixed Economic System: 3
•Co-existence of Private and Public Sector
•Check on Economic Inequalities
•Control of Monopoly Power
Under socialism, there is almost equality between rich and poor. There is no problem of class struggle.
Economic, Social and Political Equality
Unlike capitalistic economy, there is no cut throat competition. It means lack of competition as state is the sole entrepreneur.
No Competition
In socialism, government plays significant role in decision making. Thus, government has complete control over economic activities like distribution, exchange, consumption, investment and foreign trade etc.
Positive Role of Government
It means that there is no scope of exploitation of labour class. Government keeps a close eye on the needs of the poor masses while formulating plans.
Maximum Social Welfare
Under the mixed economic system, government takes huge initiatives to control monopoly practices among the private entrepreneurs through effective legislative measures.
Control of Monopoly Power
It is a mixture of capitalism and socialism.
Mixed Economic System
Under this system there is freedom of economic activities and government interferences for the social welfare.
Mixed Economic System
Hence it is a blend of both the economies.
Mixed Economic System
E.g. India—developing country, UK & USA—developed countries, etc.
Mixed Economic System
According to _______, “Mixed economy is that economy in which both public and private sectors cooperate.”
Prof. Samuelson
_______ is that economy in which both public and private sectors cooperate.
Mixed economy
In public sector, industries like defence, power, energy etc., are set up. On the other hand, in private sector all the consumer goods industries, agriculture, small-scale industries are developed.
Co-existence of Private and Public Sector
In this mixed economic system, government takes several measures to reduce the gap between rich and poor through progressive taxation on income and wealth. The subsidies are given to the poor people and also job opportunities are provided to them. Other steps like old age pension, free medical facilities and free education are also taken to improve the standard of poor people.
Check on Economic Inequalities:
