Core Problems in Macroeconomics Flashcards
1
Q
Central Problems Of Economics
A
- Scarcity
- Choice
- Opportunity Cost
2
Q
Define scarcity
A
- limited resources
- only have given amt at given time
- unlimited wants
- human desires
3
Q
Limited resources
A
- fop
- llce
- wrip
4
Q
Land
A
- plot of ground; natural resources
- factor payment: rent
5
Q
Labour
A
- physical and mental human effort expanded in production process
- wages
6
Q
Capital
A
- man-made aids
- increase production wealth
- physical vs human capital
- interest (for use of capital)
7
Q
Physical capital
A
- manufactured items, used directly
- ie. machines, roads, buildings
8
Q
Human capital
A
- skills, knowledge, talents
- developed thru education, trngs that increase inefficiency
- ie. teachers trng @ Institute of Education
9
Q
Entrepreneurship
A
- entrepreneurial ability
- combines land, labour and capital to produce a good or service
- effective methods of production
- profit
- e.g Zhou Qunfei, smartphone screen supplier, US $18.6 billion
10
Q
Define unlimited wants
A
- desire for higher lvls of consumption
- once a particular lvl attained
- old wants satisfied, new ones created
11
Q
Unlimited wants and limited resources
A
- efficient utilisation of fop
- gds and svs most desired by society are produced
- choices need to be made
12
Q
Define choice
A
- act of selecting amongst alternatives
- involves sacrifices (due to limited resources)
- requires rationality
- weigh benefits and costs carefully
- maximise satisfaction
13
Q
3 fundamental questions (for producers)
A
- What and how much to produce
- method of production (how)
- for whom to produce (target consumers)
14
Q
What and how much to produce (fundamental questions)
A
- quantity
- type of gd
- e.g. military good (defense increases) or consumer gd (S/L increases)
15
Q
Method of Production
A
- most efficient and effective
- how FOP should be utilised
- produce max output
- e.g. type of machines, amt of labour to supply
16
Q
For Whom to Produce
A
- how much of a person’s wants to be fulfilled
17
Q
How scarcity affects decision-making
A
- households
- gov
- firms
18
Q
Households (How scarcity affects decision-making)
A
- limited resource: given amt of incomes
- need to divide amongst competing wants
- e.g clothing vs food
19
Q
Firms (How scarcity affects decision-making)
A
- decide on how, what and for whom to produce/invest
- limited resource: finance
20
Q
Government (How scarcity affects decision-making)
A
- have other macroeconomic goals
- ie. stable prices, full employment, sustained economic growth
- limited resources ie. budget and unlimited wants
- e.g. building sch vs hospital on same plot of land
21
Q
Opportunity Cost
A
- next best alternative forgone
- sacrifice of all alternatives in production/ consumption of good
- involves ranking of choices
- occurs due to limited resources and unlimited wants
22
Q
Summary
A
scarcity –> choice –> opportunity cost
