chapter 1 Flashcards
Economics . (Mankiw and Taylor)
is the study of how society manages its scarce resources
Economics (Acemoglu, Laibson and List)
is the study of how agents choose to allocate scarce resources and how those choices affect society.
Economics (Colander)
is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society.
Economics (Robbins)
is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.
Economics (Krugman and Wells)
is the social science that studies the production, distribution, and consumption of goods and services.
(The economic problem)
Economics
strives to understand how economic agents make decisions and seek to satisfy needs and wants within a context of scarcity of resources.
The economic activity
is how much buying and selling goes on in the economy over a period of time.
economy
is all the production and exchange activities that take place in a particular geographic region (for example: the Belgian economy).
Fundamental problem in economics is
= scarcity of resources (land, labor and capital)
A resource
is anything that can be used to produce something else:
An economic system
is the way in which resources are organized and allocated to provide for the needs of an economy’s citizens
The economic problem highlights three questions that any society must answer
- What goods and services should be produced?
- How should these goods and services be produced?
- Who will get what will be produced?
GDP per capita0
Gross Domestic Product, is a measure to compare living standards in each country. is the total value of everything produced in a given period such as a year.
A traditional market
is a place where buyers and sellers of products and services meet.
Market as an abstract concept:
supply and demand of a certain good or
service.
A market is an institution
that allows for the exchange of scarce goods according to certain rules.
invisible hand of the market
guides this self-interest into promoting general economic well-being
market failure arises when
the market fails to allocate society’s resources efficiently or when the individual pursuit of self-interest leads to bad results for the society as a whole.
(the individual pursuit of self-interest makessociety worse off)
(The true cost of something is its opportunity cost.)
The opportunity cost of a choice:
- what you must give up in order to get it.
- what you forgo by not choosing your next best alternative.
- includes all the costs, whether or not they are monetary costs, of making that choice.
- can differ between individuals
marginal changes3
- incremental/ gradual changes to an existing plan.
An incentive
is anything that offers rewards to people to change their behavior.
In a market economy, individuals engage in trade.
They provide goods and services to others and receive goods and services in return.
gains from trade:
people can get more of what they want through trade than they could if they tried to be self-sufficient.
(An increase in output is due to) specialization:
each person specializes in the taks that they are good at performing
An economic situation is in equilibrium when
no individual would be better off doing something different.
An economy is efficient if
to achieve society’s goals
it takes all opportunities to make some people better off without making other people worse off.
Equity means
that everyone gets his or her fair share.
Microeconomics is
the study of how households, firms, and governments make decisions and how these choices affect prices, the allocation of resources, and the well-being of other agents.
Macroeconomics
is the study of economy-wide phenomena, including inflation, unemployment, economic growth, booms and recessions.
A model
is a representation of reality which facilitates
understanding of how something works.
Economists formulate hypotheses
assumptions, predictions or suppositions for something
Positive analysis
attempts to describe the world as it is.
Normative analysis
attempts to prescribe how the world should be. It
recommends what people or the government should do.
trade offs
is the loss of benefits from a decision to forego or sacrifice one option, balanced against the benefits incurred from the choice made
marginal reasoning
comparing costs and benefits of doing a little bit more of an activity versus doing a little bit less.
econometrics
Hypotheses can be tested using data and statistical models to identify
causal effects
