Chapter 1 - Principles of Microeconomics (9th Edition) Flashcards
what is economics?
the study of how a modern market economy operates and what relationships are important within it
define ‘Positive Statements.’
a theory/assertion that is built on a solid foundation of facts and can be verified using empirical data
define ‘Empirical Data.’
information acquired by scientists through experimentation and observation
define ‘Normative Statements.’
a theory/assertion/opinion based on a person’s beliefs and, as such, cannot be verified using facts.
what method do economists use to make economic theories?
the scientific method
what are the steps that economists use when building an economic theory?
- set up a simple hypothesis
- define the terms involved
- spell out assumptions (conditions) under which the hypothesis is true
despite it’s inability to approach science in terms of universality, what does economics contribute to society?
It is efficient in predicting ‘how’ the average consumer will ‘react.’
economics deal in generalities and not the specifics.
what is an academic economist?
economists who teach in educational institutions as well as engage in research activities related to economics
what is a financial economist?
economists who work in wealth-management firms/banks and often engage with the general public to help them plan their retirement or establish a steady flow of income.
what is a corporate economist?
economists who are employed by large corporations (banks included) and can engage in relevant research. they sometimes branch out into management roles such as vice-president of domestic operations.
what is a governmental/organizational economist?
economists who work directly for provincial/federal governments for whom they collect and analyze data for. they may oftentimes engage in research too. there are also others who work for non-governmental organizations such as the World Bank, the International Monetary Fund, Oxfam, or the World Wide Fund for Nature.
what is Macroeconomics?
it is the study of how the MAJOR components of the economy interact. (e.g. consumer spending, investment spending, gov’t policies, and exports.)
what is Microeconomics?
it is the study of the outcomes of decisions made by INDIVIDUAL people and firms alongside the costs of production and the nature of market structures. (e.g. supply and demand)
define what a ‘monopolistic market’ is
a type of market where there is only one firm that dictates the price and supply levels of goods and services, and that firm has total market control
define what a ‘competitive market’ is
a type of market composed of many firms, where no one firm has total market control
define ‘resources’ in economics
it is the factors of production or inputs
enumerate the four factors of production
- labour
- capital
- land
- enterprise
enumerate the four factor payments
- wages
- interest
- rent
- profits
define what ‘labour’ is in economics
refers to a broad spectrum of HUMAN EFFORT, ranging from the work of a skilled physician to that of a construction worker.
define what ‘capital (non-financial)’ is in economics
made up of the TOOLS, equipment, factories, and buildings used in the production process, and is not to be confused with financial capital, such as money, stocks, or bonds.
define what ‘land’ is in economics
any natural resource, such as fertile soil, forests, fishing grounds, or minerals in the ground.
define what ‘enterprise’ is in economics
that very special human talent that is able to apply
abstract ideas in a practical way (ability to turn ideas to
performable actions).
in a market economy, through what means can income be earned?
through payment of wage/s, interest, rent, and profits
what is Wage?
it is a general term that includes all forms of payment to the various kinds of LABOUR SERVICES such as salaries, stock bonuses, gratuities, commissions, and employee benefits.
