ECON MIDTERM Flashcards
insufficiency of resources to meet the wants of consumers and insufficiency of resources for producers that hamper enough production of goods and services.
Scarcity
as a study, is the social science that involves the use of scarce resources to satisfy unlimited wants.
Economics
he said that economics as the study of mankind in the ordinary business of life.
Alfred Marshall
is a condition where there are insufficient resources to satisfy all the needs and wants of a population. Scarcity may be relative or absolute.
Scarcity
is when a good is scarce compared to its demand.
Relative scarcity
describes resources that are fixed in supply and cannot be increased or decreased, regardless of demand. Their supply is hard-capped due to intrinsic limitations.
Absolute scarcity
A division of Economics that is concerned with the overall performance of the entire company. It studies economic system as a whole rather than the individual economic units that make up the economy.
MACROECONOMICS
is about the nature of economic growth, the expansion of productive capacity and the growth of national income.
MACROECONOMICS
is concerned with the behavior of individual entities such as the consumer, the producer, and the resource owner.
MICROECONOMICS
It is more concerned on how food flow from the business firm to the consumer and how resources move from the resource owner to the business firm. It is also concerned with the process of setting prices of goods that is also known as ??
PRICE THEORY.
Refers to the value of the best forgone alternative.
OPPORTUNITY COST
With the presence of scarcity, there is a need to make decisions in choosing how to maximize the use of scarce resources to satisfy many wants as possible.
CHOICE AND DECISION MAKING
BASIC ECONOMIC PROBLEMS OF THE SOCIETY
- What to produce;
- How much to produce
- How to produce and
- For whom to produce.
is the means through which society determines the answers to the basic problems mentioned. A country may be under any of the following types or even a combination of the three -
ECONOMIC SYSTEMS
what are the economic systems?
TRADITIONAL ECONOMIC SYSTEM
COMMAND ECONOMIC SYSTEM
MARKET ECONOMIC SYSTEM
Decisions are based on traditions and practices upheld over the years and passed on from generation to generation. Methods are stagnant and therefore not progressive. Traditional societies exist in primitive and backward civilizations.
TRADITIONAL ECONOMIC SYSTEM
This is when the authoritative system wherein decision-making is centralized in the government or a planning committee. Decisions are imposed on the people who do not have any say in what goods are to be produced. The economy holds true in dictatorial, socialist, and communist nations.
COMMAND ECONOMIC SYSTEM
This is the most democratic from of economic system. Based on the workings of demand and supply, decisions are made on what goods and services to produce. People’s preference is reflected in the prices they are willing to pay in the market and therefore the basis of the producer’s decisions on what goods to produce.
MARKET ECONOMIC SYSTEM
also known as the factors of production, are the resources used to produce goods and services. These resources are, by nature, limited and therefore, command a payment that becomes the income of the resource owner.
ECONOMIC RESOURCES
Soil and natural resources that are found in nature are not man made. Owners of lands receive a payment known as rent.
LAND
Physical and human effort exerted in production. It covers manual workers like construction workers, machine operators and production workers, as well as professionals like nurses, lawyers and doctors. The term also includes jeepney drivers, farmers, and fishermen. The income received by labors is referred to as wage.
LABOR
Man-made resources used in the production of goods and services, which includes machineries and equipment. The owner of capital earns an income called interest.
CAPITAL
Special skills of an individual needed to produce goods and services like managerial and organizational skills.
ENTREPRENEURIAL ACTIVITY
income of an entrepreneur after deducting the payments from the owners of land, labor and capital.
Profit
deals with what is – things that are currently happening such as the current inflation rate, the number of employed labors, and the level of the Gross National Product.
Positive Economics
refers to what should be – that which embodies the ideal such as the ideal rate of population growth or the most effective tax system.
Normative Economics
measures the output of a country’s residents regardless of the location of the actual underlying economic activity.
GROSS NATIONAL PRODUCT
is the monetary value of all finished goods and services made within a country during a specific period.
GROSS DOMESTIC PRODUCT
is an interaction between buyers and sellers of trading or exchange.
market
financial market
financial market
is the most common type of market because it is where we buy consumers goods.
goods market
where the workers offer services and look for jobs, and where employers look for workers to hire.
labor market
is the willingness of a consumer to buy a commodity at a given price.
Demand
shows the various quantities the consumer is willing to buy at various prices.
demand schedule
shows how the quantity demanded of a good depends on its determinants, the most important of which is the price of the goods itself, thus the equation:
demand function
is felt when the change in the price of a good changes the consumer’s real income or purchasing power
Income effect
is felt when a change in the price of a good changes demand due to alternative consumption
Substitution effect
all other related variables except those that are being studied in the moment and are held constant, there is an inverse relationship between the price of a good and the quantity demanded for that good.
“ceteris paribus”
As price increases, the quantity demanded for that product decreases. The low price of the good motivates the consumer to buy more. When price increases, the quantity demanded for those goods decreases.
The Law of Demand
Non-Price Determinants of Demand
✓ Income
✓ Taste
✓ Expectations
✓ Prices of related goods
✓ Population
are goods that are used together, such as cell phone or sim card, car and car tires, and coffee and creamer.
Complements
increase in the for a good will increase the demand for the complement since they are used together.
Complements
goods are those that are used in place of each other, like margarine and butter and artificial sweeteners for sugar.
Substitute
When a change in the price of a good causes the quantity demanded for that good to change, this is illustrated on the same demand curve and is a simple movement from one point to another on that curve.
Shifts of the Demand Curve
the relationship between a range of prices and the quantities demanded at those prices, as illustrated by a demand curve or a demand schedule.
demand
a certain point on the demand curve or one quantity on the demand schedule.
quantity demanded
refers to the curve
demand
specific point on the curve.
quantity demanded
sum of all the individual buyer’s demand curves.
market demand
states that when the price of a good decreases, it is as if the buyer of the good’s income went up.
income effect
states that when the price of a good decreases, consumers will substitute away from goods that are relatively more expensive to the cheaper goods
substitution effect
are goods that are consumed together.
Complements
are goods where you can consume one in place of the other.
Substitutes
A schedule or a curve describing all the possible quantities that sellers are willing and able to produce, at all possible prices they might encounter in a particular period of time
SUPPLY
As the price of a good goes up. When the price goes down, the amount suppliers are willing to sell goes up, when the price goes down this creates an upward-sloping -
SUPPLY CURVE
the amount of a good or service U sellers are willing to sell at a sell at a specific price
Quantity Supplied
A movement along a supply curve resulting from a change in a good’s price.
Change in quantity supplied
A movement or shift in an entire supply curve resulting from a change in one of the non- price determinants of supply.
Change in Supply
changes in non-price factors that will cause an entire supply curve to shift (Increasing or decreasing market supply)
Determinants of Supply
Changes in production cost and related factors can cause an entire supply curve to shift right or left. This causes a higher or lower quantity to be supplied at a given price
Supply curve shift
refers to the quantity of goods that a seller is willing to offer for sale.
Supply
shows different quantities the seller is willing to sell at various prices.
Supply schedule
Supply curves relate prices and quantities supplied assuming no other factors change
Ceteris Paribus assumption
shows the dependence of supply on the various determinants that affect it.
Supply function
Non-Price Determinants of Supply
- Number of Sellers
- Prices of Resources
- Taxes and Subsidies
- Technology
- Supplier’s Expectations
- Prices of Related Products
- Prices of Joint Products
all other factors being equal, as the price of a good or service increases, the quantity of goods or services that suppliers offer will increase, and vice versa.
Law of Supply
