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Principles of economics year 1 > EC1101 Keywords > Flashcards

EC1101 Keywords Flashcards

1
Q

GDP Per Capita

A

The total amount of goods and services produced over a given period

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2
Q

Balance of payments

A

A record of all economic transactions between a country and the rest of the world over time.
Divided into Capital Account, Current Account and Financial Account

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3
Q

Gross Domestic Product (GDP)

A

The market value of the output produced for final consumption in an economy during a given period

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4
Q

Disposable Income (DI)

A

The income available after paying taxes and receiving transfers from the government

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5
Q

Nominal GDP (NDGP)

A

NGDP = Price of Good x Quantity of Good

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6
Q

Real GDP

A

GDP measured in constant prices

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7
Q

Take Off

A

A brief period of intensive growth in which industrialisation begins to occur

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8
Q

factors of production

A

capial,labor,land and enterprise

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9
Q

what is technlology?

A

it is a way we can combine labor,capital,materials and other outputs to create an output

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10
Q

Technological progress

A

A change in technology that reduces the number of resources required to produce a certain amount of output each time

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10
Q

Capitalism

A

An economic system based on provate ownership of assets and labor services which organizes firms into markets for private benefit

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11
Q

The capitalist revolution

A

refers to the emergence and global spread of a way of organising the economy refers to capitalism.

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12
Q

Economics

A

study of how we acquire things that make up over livelihoods,how we interact with one another,with natural environment and how each of things change over time

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13
Q

Dependancy Theory

A

poor countriea remain underdevloped due to their economic dependence on wealthier countries often through exploitation

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14
Q

Modernization Theory

A

poor countries can develop by following the path of rich nations focusing industrialization,urbanization and adopting western institutions

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15
Q

World Systems Theory

A

The global system is divided into core, semi-periphery and periphery countries with exploitation preventing poor nations from developing

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16
Q

Neoliberalism

A

Prosperity is achieved through free-market policies, deregulation and minimal government intervention

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17
Q

Economic Model

A

A simplification of the world that explains actions and interactions of economic agents and predicts the most liekly outcome

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18
Q

Thomas Malthus

A

An economist made a theory that states that the supply of food cannot keep up with the growth of the human population, inevitably resulting in disease,famine,war and calamity

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19
Q

Economic rent

A

Net benefit from option taken-foregone benefit from the next best option

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20
Q

Isocost Line

A

the line shows all combinations of labour (L) and capital (K) that a firm can afforf a specific total cost, C

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21
Q

Isocost formula

A

C = wL + rK
C = total cost
L =the quantity of labour
r = the rental rate (cost per unit of capital)
w = The wage rate (cost per unit of labour)

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22
Q

the slope of the isocost line shows

A

the relative price of labour and capital

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23
Q

when do shifts occur in the isocost line

A

occurs when total cos changes or when the price of inputs changes

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24
The slope of isocost line is given by
price ratio between labour and capital.
25
slope of isocost line formula
-w/r w = wage rate (price of labour) r = rental rate (price of capital)
26
the price ratio shows
the oppoturnity cost of labour terms of capital
27
total cost
Total Cost = sum of costs of input (wL) + price of resource x amount of resources (PcR)
28
Production Function
describes the relationship between inputs(X) and outputs (Y). Y = f(X) where f represents the function linking inputs and outputs
29
Isocost diagram
foucses on the cost of inputs in production and helps firms decide on the optimal mix of inputs
30
PPF (Production Possibiliy Frontier)
Focuses on the maximum output combinations of different goods that can be produced with available resources, illustrating trade-offs and oppoturnity costs
31
Total Cost
(wage x Number of workers) + (Price of Coal x tonnes of coal)
32
The price ratio can be calculated as the slope
slope = wage/ price of coal
33
Social interactions
Situations where the actions taken by each person affect not only their own outcomes but also outcomes ofothers
34
Game Theory
it is the study of strategic behaviours, focusing on situations where each actor understands the benefits they receive depending on the actions taken by all involved.
35
In the game the following is analysed
- the player - the strategies - the payoffs
36
Best response
the best response iss the strategy that is optimal for you, given the actions that are possible for others
37
Dominant strategy
is the strategy you choose to enact. A strategy that needs to produce the highest possible payoffs in each scenario.
38
Dominant strategy equilibrium
occurs when every player plays thier dominant strategy
39
Invisible hand theory
introduced by Adam Smith, that when individuals act in their own self-interest in a free market, they unintentionally promote the good of society as a whole, as if guided by an "invisible hand."
40
Nash Equilibrium
if people choose their actions independently, the economy may become stuck in an equilibrium
41
Prisoner's dilemma
is a game in which the payoffs in the dominant strategy equilibirum are lower for each player and lower in total if niether player gets played in their dominant strategy
42
Social Preferences
Preferences that take into account that well-being of others even if resukts in lower payoffs for the individual
43
Altrusistic preferences
a person who is willing to bear a cost to help another person
44
Envy/Spiteful preferences
A person who is willing to bear a cost to punish another person
45
one-shot sequential game
played in stages. Players dont choose thier strategoes at same time. unlike in simultaneous games.
46
game theory studies who agents interact based on
overarching rules strategies payoffs
47
important motives of Game Theory
self-interest a concern for others a preference for fairness
48
Most interactions involved in game theory are
a conflict of interest an oppoturnity for mutual gain
49
faults in capitalism
- private property is not secure - markets arent competitive - firms are often run by individuals who survive because of political connections or privileged birth
50
constrained optimization
a decision maker chooses the value of one or more variables
51
total revenue
Price x quantity
52
total costs
average cost x quantity
53
profit
total revenue - cost
54
AC
total costs/Quantity
55
Fixed costs
costs that dont vary with production TC(Q=0) = F
56
Variable costs
costs that vary with output
57
Economies of Scale
cost advantages business experiences as it increases production. increases output and decreases the average cost per unit
58
theres two types of economies of scale
internal where cost savings within the firm external where cost savings outside the firm
59
Diseconomies of scale
where increase in size of production and increase in average costs
60
constant returns to scale
increase in scale of production no change in average costs
61
Marginal costs (MC)
is the effect on the total cost of producing one additional unit of output. it corresponds to the slope of the total cost function at each point.
62
MC(Q)
d(TC)/dQ
63
price elasticty of demand
measures consumer repsonsiveness to price changes and determines profitability
64
Price elasticity of demand formula
change in Quantity% / Change in Price%
65
price inelastic demand
ped <1. usually subsidy goods
66
price elastic demand
ped>1. usually substitute goods
67
institution
the written and unwritten rules that govern social interactions
68
constraints
define what people can and cannot do when they interact
69
incentives
rewards and punishments that shape decision making eg: carrot and stick
70
power
the ability to achieve one goals even when opposed by others
71
bargaining power
the extent of an individual's advnatage in securing a larger share of economic rents in an interaction
72
principle agent problem
occurs when one party hired another agent to act on their behlaf. interests arent aligned due to asymmetric information. thus confliuct of ownership and control
73
institutions and outcomes are assesed based on
efficency and fairness criteria
74
social conflicts can be represented by using a
production possibility frontier(PPF) or feasible set graphs
75

Principles of economics year 1 (2 decks)

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