Chapter 1: What is Economics Flashcards
What is Economics (social science)
A social science that examines the way in which people behave and interact in order to overcome problems that arise from the basic economic problem of scarcity
Define Social Science
the study of how people behave and interact in society
Define Efficiency
the ratio of useful output to total input (best way to allocate resources)
Define Macroeconomics
Macroeconomics examines factors which affect the economy as a whole such as
- economic growth
- inflation and deflation
- unemployment
- taxes
- policies
Define Microeconomics
Microeconomics examines the market from a smaller perspective focusing on economic agents and their choices on certain gods and services to improve their economic wellbeing, given their budget constraints
Define Sustainability
The ability of the present generations to meet its needs without compromising future generations
Define Equity
The concept or idea of fairness
What is the difference between Equality and equity
equality allows everyone the same resources, regardless of the outcome, while equity recognizes certain people’s needs, and distributes resources to create the same outcome at the end
Define Economic Wellbeing
the concept relating to the level of prosperity and quality of living standards enjoyed by members of society, and it includes
- present and future financial security
- the ability to meet basic needs
- the ability to make economic choices permitting achievement of personal satisfaction
- The ability to maintain adequate income levels on the long term
What are the Four Factors of production?
Land, Capital, Labor, and entrepreneurship
What is Capital or “physical capital”
Any good or service which produce other goods and services. ex; buildings
What is an Investment?
when firms spend money of “physical capital”
What is Labor?
Labor is any human contribution, whether mental or physical
What are economic Models?
a simplification of reality, expressed through mathematical analysis and equations or a diagram used to map relationships of certain variables in the economy.
What is Cetris Paribus
A Latin phrase meaning “all other things being equal” which is used after a phrase about an economic model. Its used to indicate that this phrase or statement was a conclusion of holding other variables constant.
What are positive statements?
A statement that is either true or false, and is backed with evidence
What are Normative Statements
Opinion based and subjective statements.
What is the PPC Model?
Model which illustrates the 1- maximum combinations of two types of output that can be produced in an economy 2- in a given time, 3-if all resources in the economy are being used efficiently, and 4- the state of technology is fixed.
The PPC is based on assumptions
1- all resources and state tech is fixed
2- the economy only produces 2 goods
3- all resources of the economy go into these 2 outputs
How does the PPC display Scarcity ?
The curve or PPC suggests that there is limited resources to b put into the outputs
How does the PPC illustrate Choice?
Economic Agents must choose a ratio of production of these 2 outputs
How does the PPC illustrate Opportunity Cost ?
the quantity of product a forgone when quantity of product B is chosen
How does the PPC Display Efficiency?
The PPC is mapped out on the assumption that production will be as efficient as possible.
Why is the PPC curve not accurate to the realistic ratio production of outputs?
Because if we were to use all the resources (upon which the PPC assumes) it would leave no resources for the future, therefore violating sustainability, and the economic wellbeing of the future society.
