Intro to Econ Flashcards
Where does the term “economics” origin?
Economics comes from the Greek word or Oikonomia.
what does the word Oikonomus or Oikonomia means?
“household management”
due to the growth of the Greek society until its development into
city-states, the word “Economics” was then referred to as?
“state management”
Economics is defines as?
Economics is a science of making choices, in the
present and over time.
The science which studies human behaviour as a
relationship between ends and scarce means which
have?
alternative uses
Economics is the __________ that
deals with how society allocates scarce resources among
its unlimited wants and needs.
social science
What is scarcity?
Lack of enough resources to satisfy all desired uses of those resources
Lack of enough resources to satisfy all desired uses of those resources
Scarcity
Scarcity imposes?
Basic Economic Choices, What to produce, How to produce, How much to produce, Who receives
What is the relationship between
Economics and Scarcity
- Scarcity gave birth to the study of economics
- It is the heart of the study of economics and reason
behind its establishment - If there is no scarcity,
there is no need for economics
It is the science of scarcity
Economics
the inability to satisfy unlimited
human wants with limited resources, that is, when we CANNOT HAVE ALL that we want or
need
Scarcity
amount of one good that
must be given up to get more of another.
Opportunity cost
The ______________ of any decision is the value of benefits forgone from alternative uses of
resources
opportunity cost
refers to the foregone
value of the next best alternative
Opportunity cost
it is the value of what is given-up when one makes a choice.
Opportunity cost
A _____ is a basic
requirement for
survival and
includes food,
water, clothing and
shelter.
Need
- A _____ is a way of
expressing a need. Since a
variety of wants can satisfy
a need, wants tend to be
broader than needs
Want
Abraham Maslow hierarchy of needs
- Need for self - actualization
- Esteem needs
- Belongingness and love
needs - Basic needs
are natural, human, and man-made
wealth that can provide satisfaction through the
production of goods and services.
Resources
Three Categories of resources
- Natural resources
- Human resources
- Physical resources
are forms of wealth derived
from nature
Natural resources
It is the most basic form of wealth
derived from human resources
Human labor
________________ of people are forms
of energy and, therefore, can create things through
work.
Muscular power and brain power
used in manual labor to till the
soil, to make clothes, to fish, and to construct
houses and other buildings.
Muscular power
talents, skills, knowledge, and
enterprise are qualities that go with muscular
power to make goods and services
Brain power
These are man-made things used in the production of commodities and services.
Physical resources
It is a compliment human resources by
helping human labor to be more productive.
Physical resources
Resource/s is/are considered as _____ in
production/s
inputs
What are the four basic economic questions?
What to produce
How to produce
How much to produce
Whom to produce
Why Study Economics?
- To understand the Society
- To understand Global Affairs
- To be an informed Voter
refers to anything that has a functional value (usually in money), which can be traded for goods and services.
Wealth
refers to direct utilization or usage of the available goods and services by the buyer or the consumer sector.
Consumption
is defined as the formation by the firms of an output (products – goods/services).
Production
is the process of trading goods and/or
services for money and/or its equivalent.
Exchange
– is the process of allocating or
apportioning scarce resources to be utilized by the household, the business sector, and the rest of the
world.
Distribution
Ten Principles of Economics (How People Make Decisions)
- People face tradeoffs.
- The cost of something is what you give up to
get it. - Rational people think at the margin.
- People respond to incentives.
Ten Principles of Economics (How People Interact)
- Trade can make everyone better off.
- Markets are usually a good way to organize
economic activity. - Governments can sometimes improve
economic outcomes.
Ten Principles of Economics (How the Economy as a Whole Works)
- The standard of living depends on a country’s
production. - Prices rise when the government prints too
much money. - Society faces a short-run tradeoff between
inflation and unemployment
focuses on the behavior of an entire
economy. It introduces topics of measuring income and
expenditure, savings and investment, general level of
prices, etc.
Macroeconomics
studies the decisions of individuals
and firms, how these decisions are made, how these
individuals interact, and how they influence the allocation
of society’s resources and the distribution of income.
Our interest here is in the behavior of economic agents
(households and firms or buyers and sellers)
Microeconomics
Is the branch of
economics that
examines the
choices of
individuals
concerning one
product, one firm,
or one industry
Microeconomics
Is the branch of
economics that
examines the
behavior of the
whole economy
at once.
Macroeconomics
Positive economics
- attempt to describe how the economy functions
- relies on testable hypotheses
Normative economics
relies on value judgements to evaluate or recommend
alternative policies.
Three Es in Economics
- Efficiency
- Equity
- Effectiveness
means productivity and proper allocation of
economic resources.
Efficiency
It also refers to the relationship between scarce
factor inputs and outputs of good and services.
Efficiency
means justice and fairness.
Equity
- means attainment of goals and objectives.
Effectiveness
Basic steps in Policy Formulation
- Stating goals
- Identify options
- Evaluation
holding everything else constant
ceteris paribus
is something measured by a
number; it is used to analyse what happens
to other things when the size of that
number changes (varies)
Variable
are those whose values changes
when the value of another variable changes
Dependent variables
are those whose changes will
cause the dependent variable to change.
Independent variables
is the ratio of the
vertical change to the corresponding horizontal
change as we move to the right along the line, or as
it is often said, the ratio of the “rise” over the “run”
The slope of a straight line
How to Measure Slope?
Slope = Vertical Movement or B - A or F - E or ∆Y
Horizontal Movement A - C D - F ∆X
∆Y over ∆X
Different Types of Slope of a Straight - line Graph
Negative slope
Positive slope
Zero slope
Infinite slope
Two of the most basic economic models
- The Circular Flow Diagram
- The Production Possibilities Frontier
A curve that shows the maximum
combinations of two outputs that an
economy can produce, given its available
resources and technology
Production Possibilities Curve
It illustrates an economy’s capacity to
produce goods, subject to the constraint
of scarcity.
Production Possibilities Curve
The _____________________ is a
visual model of the economy that shows how money ( peso) flows through markets among households and firms
circular-flow diagram
