ECON Lesson 2 Flashcards by Mauipa-Zhayreel D. Baragona

Q

Applies the conclusions drawn from economic theories and empirical studies to real-world situations with the desired aim of informing economic decisions and predicting possible outcomes.

A

Applied Economics

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Q

This field of economics is concerned with using economic theories and models, related principles and concepts to understand contemporary socioeconomic issues.

A

Applied Economics

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Q

These can be understood in terms of demand and supply, echange, cost and benefits, profit maximization.

A

Social Processes and Phenomenon

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Q

What are the 3 types of Social Processes and phenomenon?

A

Social Relationships
Social Changes
Migration

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Q

Social Processes and phenomenon

Interactions between buyers, sellers, producers, and consumers create networks and partnerships that influence market dynamics.
Example: Customer loyalty programs fostering relationships.

A

Social Relationships

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Q

Social Processes and phenomenon

Shifts in societal norms, values, and behaviors impact market trends.
Example: The rise of sustainable products due to environmental awareness.

A

Social Changes

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Q

Social Processes and phenomenon

Movement of people influences demand for goods and services.
Example: Urban migration increases the need for housing, transportation, and urban markets.

A

Migration

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Q

The process of which the well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and objectives.
The sustained elevation of an entire society and societal system toward a better and more humane life.

A

Economic Development | Social Development

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Q

What are the 10 Factors of Economic Development

A

Level of Production
Quality of Life
Sustainable Development
Political Stability
Macroeconmic Stability
Levels of Inrastucture
Natural Resources
Educational Standards
Saving Rates/Foreign Aid
Barriers to Trade

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Q

Factors of Economic Development

A stable government ensures consistent policies, encourages investment, and fosters trust in institutions. Political unrest can deter economic progress.

A

Political Stability

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Q

Factors of Economic Development

Low inflation, controlled public debt, and stable exchange rates create a favorable environment for businesses and investments.

A

Macroeconomic Stability

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Q

Factors of Economic Development

Good infrastructure, such as roads, energy systems, and communication networks, reduces production costs and improves market efficiency.

A

Levels of Infrastructure

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Q

Factors of Economic Development

Abundant resources (like oil, minerals, or fertile land) can boost economic growth when managed sustainably and efficiently.

A

Natural Resources

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Q

Factors of Economic Development

A well-educated workforce enhances productivity, innovation, and the ability to adapt to new technologies.

A

Educational Standards

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Q

Factors of Economic Development

High domestic savings provide funds for investment, while foreign aid can support development projects and bridge financial gaps.

A

Saving Rates/Foreign Aid

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Q

Factors of Economic Development

Low trade barriers promote international trade, increasing access to markets, technology, and resources, while high barriers can limit economic growth.

A

Barriers to Trade

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Q

Theories

Suggests that all countries develop through a series of predictable stages over time.

Most famous is Rostow’s Five Stages of Growth

A

Linear Stages of Growth Model

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Q

How societies transition from traditional economies to modern, industrialized nations through five stages of economic growth. Each stage reflects changes in production, technology, and social organization.

A

Walt Whitman Rostow’s Model of Development

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Q

What are the 5 Stages of Rostow’s Model of Development?

A

Traditional Society
Pre-conditions for Take Off
Take off
The Drive to Maturity
High Mass Consumption

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Q

Rostow’s Model of Development

Planiting for survival

A

Traditional Society

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Q

Rostow’s Model of Development

Resources mobalized for production and trade.

A

Pre-conditions for Take-Off

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Q

Rostow’s Model of Development

Mass production and selling begin.

A

Take-Off

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Q

Rostow’s Model of Development

Diverse industries and advanced technology.

A

Drive to Maturity

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Q

Rostow’s Model of Development

Prosperity, consumer focus, and improved living standards.

A

High Mass Consumption

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# Model This progression highlights how societies evolve economically and socially to achieve sustained growth and development.

Rostow's Model of Development

# Theory * Emphasizes shifting from agriculture to industrialization and services to achieve economic growth. * Explains how labor, capital, and technology must be reallocated for sustained development. | Includes models like Lewis’ Two-Sector Model

Theories and Patterns of Structural Change

# Model Was proposed by economist W. Arthur Lewis in 1954. It explains growth of a developing economy in terms of labour transition by 2 sectors. Capitalist/Industrial and Agricultural/Subsistence Sector.

LEWIS DUAL MODEL OF DEVELOPMENT | or Lewis Dual-Sector Model / Unlimited Supplies of Labor Model

# LEWIS DUAL MODEL OF DEVELOPMENT What are the 2 Main Sectors of the Economy?

- Tradiotional Agricultural Sector - Modern Industrial Sector

# LEWIS DUAL MODEL OF DEVELOPMENT * Characterized by low productivity, subsistence farming, and a surplus of labor (workers who are underemployed or earn minimal wages). * The marginal productivity of labor is close to zero, meaning additional workers do not significantly increase output. * Labor intensive * Low dependency on capital * Low marginal and average productivity * Lover average wages

Traditional Agricultural Sector

# LEWIS DUAL MODEL OF DEVELOPMENT * Represents the growing, capital-intensive sector with higher wages and productivity. * Driven by investments in technology, infrastructure, and industrial development. * Higher average wages * Higher marginal and average productivity * Hifger daman or labour.

Modern Industrial Sector

What are the 4 Stages of Lewis Dual Model of Development?

1. Surplus Labor in Agriculture 2. Labor Migration to Industry 3. Industrial Growth 4. Turning Point

# Stages of Lewis Dual Model of Development In the traditional sector, there is an oversupply of labor, meaning some workers can move to the industrial sector without reducing agricultural output.

Surplus Labor in Agriculture

# Stages of Lewis Dual Model of Development * Workers migrate from the agricultural sector to the industrial sector, attracted by higher wages. * The industrial sector uses surplus labor to grow and invest in further capital, increasing productivity.

Labor Migration to Industry

# Stages of Lewis Dual Model of Development * As the industrial sector expands, wages remain relatively constant because there is still a surplus of labor in the agricultural sector. * Profits from the industrial sector are reinvested, leading to sustained economic growth.

Industrial Growth

# Stages of Lewis Dual Model of Development * Eventually, the surplus labor in agriculture is exhausted. * At this point, wages begin to rise in both sectors as competition for labor increases.

Turning Point

# Theory * This approach focuses on the structural challenges and power imbalances that hinder the economic development of developing countries. * These models critique how developing nations are constrained by their dependency on developed countries in terms of trade, technology, and capital flows.

INTERNATIONAL DEPENDENCE REVOLUTION / THEORY

What are the 3 Key Theories within the International Dependence Revolution?

- Neocolonial Dependence Model - False-Paradigm Model - Dualistic-Development Thesis

# Key Theories within the International Dependence Revolution Key Idea: Developing nations remain economically dependent on and dominated by developed countries, even after formal colonialism ends. Mechanism: Developed countries and multinational corporations exploit resources, labor, and markets of developing countries, perpetuating inequality.

Neocolonial Dependence Model

# Key Theories within the International Dependence Revolution Key Idea: Developing countries adopt inappropriate policies and strategies because they are influenced by misguided advice from international experts and institutions like the IMF and World Bank. Mechanism: Policies based on Western economic models often fail to consider the unique socio-economic conditions of developing nations.

False-Paradigm Model

# Key Theories within the International Dependence Revolution Key Idea: Developing economies are characterized by the coexistence of two sectors: * A wealthy, modern sector (urban, industrial). * A poor, traditional sector (rural, subsistence-based). Mechanism: The gap between the two sectors persists and often widens over time. The benefits of growth in the modern sector do not "trickle down" to the traditional sector.

Dualistic-Development Thesis

# Theory * Advocates for minimal government intervention, allowing free markets to drive economic growth. * Emphasizes privatization, trade liberalization, and reducing state control.

Neoclassical, Free Market Counterrevolution

# Theory Divide economies into two interconnected sectors, emphasizing their interaction and roles in development.

TWO-FOLD ECONOMIC MODELS

# Two-Fold Economic Models * Reflects the transition from subsistence agriculture (traditional sector) to industrialized, market-driven production (modern sector). * Focuses on integrating the two sectors to promote balanced growth, as seen in the Lewis Dual-Sector Model.

Traditional vs. Modern Sectors

# Two-Fold Economic Models Emphasis is placed on creating pathways for informal workers to transition into the formal economy through education, training, and infrastructure development.

Formal vs. Informal Sectors

# Formal vs. Informal Sectors Regulated, tax-paying industries with structured employment (e.g., corporations, factories).

Formal Sector

# Formal vs. Informal Sectors Unregulated, often subsistence-based activities (e.g., street vending, small-scale farming).

Informal Sector:

# Theory Critiques global and domestic structures that perpetuate underdevelopment, advocating for reforms tailored to local needs.

International Dependence Revolution

# Theory Provide frameworks to understand and bridge gaps between sectors, emphasizing the integration of traditional and modern or formal and informal economies for sustainable growth.

Two-Fold Economic Models

Requires the application of certain economic concepts and tools to understand various economic issues and problems.

Economic Study and Analysis

Compares the costs and benefits of a decision to determine if the benefits justify the expenses. It helps assess the value of an action or project in monetary terms.

Cost-Benefit Analysis (CBA)

Evaluates the cost of different approaches to achieve a specific goal or outcome, identifying the most efficient option without assigning monetary values to the benefits. ## Footnote Make the most of something

Cost-Effective Analysis (CEA)

Descriptive and fact-based; examines economic behavior as it is (e.g., analyzing unemployment trends).

Positive Economics ## Footnote Seeks to understand behavior without making judgements about outcomes.

rescriptive and opinion-based; discusses how the economy should operate (e.g., recommending policies to reduce unemployment).

Normative Economics ## Footnote Analyzes outcomes of economic behavior, evaluates them as good or bad, and sometimes prescribes a course of action.

Is a proposition about a certain related vairables that explains a certain phenomenon

Theory

Is a framwork or representation of significant principles and describe how variables are related.

Models

# True or False Assumptions that companies economusts make about the economy or business environment.

True

What are the 4 Different Economic Assumptions

- Rationality - Profit Maximization - Perfect Information - Ceteris Paribus

# Different Economic Assumptions Simply means that when you make a choice, you will choose the thing you like the best. As long as you’re doing what you want given your situation, you’re acting rationally. What gives you benefit

Rationality

# Different Economic Assumptions Is the short run or long run process by which a firm may determine the price, input, and output levels that lead to the highest profit. Expect to gain something from their transactions.

Profit Maximization

# Different Economic Assumptions know everything we need to make the best choice. In most markets, it is assumed that consumers and producers have complete and accurate information about products, services, prices, utility, quality and production methods.

Perfect Information

# Different Economic Assumptions Latin “All other things remaining constant” Assumes all other variables, except those under immediate consideration, are held constant.

Ceteris Paribus

# Theory The current population exceeds the amount of resources we have to provide.

Malthus’ Basic Theory

# Theory Emphasizes active government spending to manage economic cycles.

Keynesian Economics

# Theory Focuses on controlling money supply to combat inflation.

Monetarism

# Theory Explains price determination based on market demand and supply.

Supply and Demand Model

# Theory Analyzes strategic interactions among economic agents.

Game Theory

A graph that shows all the different combinations of output of two goods that can be produced using available resources and technology.

Production Possibility Frontier (PPF)

Captures the concepts of scarcity, choice, and tradeoffs. A curve that illustrates the maximum possible output combinations of two goods an economy can produce given its resources and technology. It highlights opportunity cost and trade-offs.

Production Possibility Frontier (PPF)

Occurs when a country can produce a good or service at a lower opportunity cost that another country. The theory of comparative advantage is attributed to political economists. David Recardo

Comparative Advantage

Describes the ability of a specific country to produce goods at a lower cost per unit.

Absolute Advantage

* The exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. * A significant aspect of economic development that has to be considered in an interconnected global economy.

International Trade Concept

What are the 5 Basic Economic Problems of the Country?

- Unemployment - Poverty - Poor Quality of Infrastucture - Income Inequality - Health Crises

# Basic Economic Problems of the Country Occurs when a person who is actively searching for employment is unable to find work.

Unemployment

What are the 3 Components of Natural Unemployment?

- Frictional Unemployment - Structural Unemployment - Surplus Unemployment

# Components of Natural Unemployment Caused by a mismatch between the worker's skill set and the skills demanded by employees.

Structural Unemployment

# Components of Natural Unemployment Caused when workers or graduates search for new jobs

Frictional Unemployment

# Components of Natural Unemployment Caused by government intervention

Surplus Unemployment

# True or False Unemployment Rate = 100 x (Unemployed Population/Labour Force) ## Footnote Mugwas daw sa exam

True

# Basic Economic Problems of the Country In economics, it has three different meanings. All three of them involve underutilization of labor that is missed by official definitions and measurements of “unemployments”

Underemployment

What are the 3 reasons for underemployment?

1. Underutilization of Skills 2.Underuse of Economic Capacity 3.Underuse of Employed Workers

What are 2 effects of underemployment?

- Labor Migration - Migration

# effects of underemployment Is the process of shifting a labor force from one physical location to another.

Labor Migration

# effects of underemployment Refers to the movement of people from one place to another * Internal: In country * Extermal: Out country

Migration

# Basic Economic Problems of the Country How are we affecting and how we solve unemployment

Income Inequality

# Basic Economic Problems of the Country Deprivation in well-being, and comprises many dimensions. It inncludes low icomes and the inability to acquire the basic goods and services necessary for survival with dignity.

Poverty

What are the 2 Types of Poverty

- Absolute Poverty - Relative Poverty

# Types of Poverty Condition where househhold income is insufficient to afford basic necessities of life.

Absolute Poverty

# Types of Poverty When households receive 50% less income than average mediam incomes.

Relative poverty

Is a rise in the general level of prices of goods and services in an economy over period of time.

Inflation

What are the 6 Causes of Inlation

- Increase in Public Spending - Increased velocity of Circulation - Exports - Trade union - Tac Reduction - Imposition of indirect taxes