Economics (Scope & Method of Economics) Flashcards
efficient allocation of scarce means of production to satisfy unlimited human wants.
Economics
things that people desire more than what’s needed.
wants
Needs
things that you must have to survive.
COMMODITY
goods or services
Four Main Reasons to Study Economics:
To Learn a Way of Thinking
To Understand Society
To Understand Global Affairs
To Be an Informed Citizen
All decisions involve trade offs
The full cost of making a specific choice includes what we give up by not making the alternative choice.
Opportunity Cost
process of analyzing the additional or incremental costs or benefits arising from a choice or decision.
Marginalism
Costs that cannot be avoided because they have already been incurred
Sunk Costs
These are markets in which profit opportunities are eliminated rapidly by the actions of those seeking the profits.
Efficient Markets
“No Free Lunch”
Profit opportunities are rare because, at any one time, there are many people searching for them.
The period in England during the late eighteenth and early nineteenth centuries.
Industrial Revolution
new manufacturing technologies and improved transportation gave rise to the modern factory system and a massive movement of the population from the countryside to the cities.
Industrial Revolution
No one can understand how countries interact without knowing something about economics.
To Understand Global Affairs
Many political issues put before citizens for a vote embody economic issues.
To Be an Informed Citizen
Macroeconomics
The branch of economics that examines the economic behaviour of aggregates - income, employment, output, and so on—on a national scale.
The branch of economics that examines the functioning of individual industries and the behaviour of individual decision-making units- that is, business firms and households.
Microeconomics
the study of an economy as a whole.
Macroeconomics
study of how individuals and companies make decisions to allocate scarce resources.
Microeconomics
approach to economics that seeks to understand behaviour and the operation of systems without making judgments.
Positive Economics
analyses outcomes of economic behaviour, evaluates them as good or bad, and may prescribe courses of action. Also called policy economics.
Normative economics
compilation of data that describe phenomena and facts.
Descriptive Economics
statement or set of related statements about cause and effect, action and reaction.
Economic Theory
formal statement of a theory, usually a mathematical statement or a graphical presentation of a presumed relationship between two or more variables.
Model
measure that can change from time to time or from observation to observation.
Variable
principle that irrelevant detail should be cut away.
Ockham’s Razor
device used to analyze the relationship between two variables while the values of other variables are held unchanged.
All Else Equal: Ceteris Paribus
set to isolate the impact of just one factor.
Cet. par.
If Event A happens before Event B, it is not necessarily true that A caused B.
The Post Hoc Fallacy
erroneous belief that what is true for a part is necessarily true for the whole.
fallacy of composition
The collection and statistical analysis of data to test economic theories
Testing Theories and Models
In economics, allocative efficiency
Efficiency
In economics, this simply means fairness.
Equity
increase in the total output of an economy.
Growth
condition in which national output is growing steadily
Stability
Treating everybody the same
Equally
Treating everybody based on their needs
Equity
