INTRO TO ECONOMICS Flashcards
It is the study of the proper allocation and efficient use of scarce resources to produce commodities for the satisfaction of unlimited needs and wants of man.
Economics
It is also defined as the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.
Economics
The word ‘economics” comes from the Greek work _____
Oikonomia
It literally translates to household management.
Oikonomia
It is anything which yields satisfaction to someone.
Goods
It is anything used to satisfy a person’s wants and desires.
Goods
Classification of Goods
- Tangible goods
- Intangible goods
- Consumer goods
- Capital goods
- Essentials
- Luxury goods
- Economic good
- Free
It is in the form of material goods or commodities.
Tangible goods
If the goods are in the form of services.
Intangible goods
Goods which yield satisfaction directly. (food and soft drinks)
Consumer goods
Goods used in the production of other goods and services.
Capital goods
If they are used to satisfy the basic needs of man such as food, shelter, and medicine.
Essentials
They are those goods man may do without, but are used to contribute to his comfort and well being.
Luxury goods
It is a good which is both useful and scarce. It has a value attached to it and a price has to be paid for its use.
Economic good
If a good is so abundant that there is enough of it to satisfy everyone’s need without anybody paying for it.
Free
Goods are created by means of _______
Production
Production may involve the physical transformation of a commodity
Manufacturing or industry
Production may also take place in the farm.
Agriculture production.
Exploration for oil, mineral, and precious metals
Production
The things which are needed to carry on the production of goods and services.
Economic Resources / Factors of Production
Three factors of production
Land
Labor
Capital
This refers to all natural resources which are given by and found in nature, and are therefore, not man-made. This term includes the soil, river, forest, and mineral deposits.
Land
The people, who own land and offer it to others for their use, earn an income called ________
Rent
It is any form of human effort exerted in the production of goods and services.
Labor
The payment for labor
Wage
Materials used in the production of goods and services including money.
Capital
It refers to man-made goods used in the production of goods and services; it also includes buildings, machinery, raw materials, and other physical necessities for use in production.
Capital
The payment of capital
Interest
This refers to people that are combining the other three factors of production to create some products or services to sell.
Entrepreneur
The economist regard entrepreneurs as a ______
Specialist form of labor input.
The payment for entrepreneurs
Profit
It is the amount that left behind after all allocations to the other economic resources have been made.
Profit
He organizes production by combining land, labor, and capital to make goods and services
Entrepreneur
He makes business decisions by determining what goods or services to produce and how to produce them
Entrepreneur
He bears the risk of his business decisions. He must suffer the consequence of losses if he fails, but in the same light, he must reap the profits as a reward if he succeeds.
Entrepreneur
He innovates by introducing new products, new technology, and new ways of organizing business.
Entrepreneur
It is the reason why people economize
Scarcity
Refers to the condition in which resources are available only in a limited supply.
Scarcity
It refers to the limitations that exist in obtaining all the goods and services that people want.
Scarcity
It gives rise to economic problems and it is the reason why man has to make a choice.
Scarcity
The imbalance between our desires and the means of satisfying those desires.
Scarcity
________ must make individual choices about what goods to produce given limited raw materials.
Producers
_______ have to decide on whether to buy
Consumers
Two Sides of Scarcity
- The infinite nature of human needs and wants.
- The limited nature of available resources.
_______ are limited while human wants have no boundaries.
Resources
The author of The Human Side of Enterprise says that “Man is a wanting animal”
Professor Douglas McGregor
It can be described as the desire for goods and services
Wants
In every society there is a need to devise a method for determining which alternative uses the scarce resources should be put into. This is the process of _______
Allocation
Society must be able to create a system of ______ that will be able to answer or solve the four basic economic question
Allocating resources
The four basic economic questions
- What to produce;
- How much to produce;
- How to produce; and
- For whom to produce.
We prioritize those goods which we deem to be the most important. This would depend on what is needed, what is wanted, and what has to be produced.
What to produce
It refers to the value of what is given up by not pursuing the next best alternative.
Opportunity cost
It is not monetary but can be applied when money is involved.
Opportunity cost
It is one of the factors that we need to take into consideration in producing another product.
Opportunity cost
It is defined as the benefits that must be foregone by not allocating the resources to the next best activity.
Opportunity cost
This question tackles the method of producing the goods and services
How to produce
As a rule of thumb, goods and services must be developed or produced at its ______
Optimum level
It is a maximum output with a minimum input without sacrificing the quality.
Optimum level
This question is now on the problem of distribution
For whom to produce
It refers to a set of economic institution that dominates a given economy with the main objective of solving the basic economic problems and proper allocation of resources.
Economic system
Nations use _________ to determine how to use their limited resources effectively
Economic systems
Primary goal of an economic system is to provide people with a minimum standard of living, or _______
Quality of life
Different types of Economic Systems
Traditional Economy
Market Economy (free enterprise)
Command Economy
Mixed Economy
Decisions on what, how and for whom to produce are made by referring to the traditional manner of doing things
Traditional economy
Patterns of consumption are often dictated by _________
Customs and tradition.
_________ are made with great influence from the past. It finds answers to the economic problems by duplicating the decisions made by previous generations.
Economic decisions
This system is generally based on the idea that the government could be relied upon to make decisions on the distribution of resources that is most desirable for society.
Command Economy/ Centrally Planned Economy
The identification of what goods to produce, the determination of production quotas that have to be met, the resources that have to be employed, etc., are all done by the _________
Government
The second solution to the economic problem is the allocation of scarce resources by government, or an agency appointed by the government.
Central planning
Economies that exclusively use central planning are called
Command economies
They direct or command resources to be used in particular ways.
Government
Command economies have certain advantages over ______
Free market economies
They also fail at times to allocate resources efficiently, so remedies often involve the allocation of resources by government to compensate for these failures.
Free markets
It is centralized in the hands of the government.
Decision making
It is the _______ that decides which goods and services to be produced in accordance with its centralized National Plan.
Government
In this type of economy, the means of production is owned by the government.
The Command Economy / Centrally Planned Economy
Two types of command economy
Strong Command
Moderate Command
It is where government makes all decisions (communism- China, Cuba)
Strong command
It is where some form of private enterprise exists but the state owns major resources (socialism – France and Sweden)
Moderate command
Command economy is also know as ____________
Planned or Managed Economy
Businesses and consumers decide what they will produce and purchase and in what quantities
Market Economy (Free Enterprise)
Market Economy is also called _________
Free Market Economy or Free Enterprise Economy
Market economy decisions are made according to ________
Law of supply & demand
_________ and ________ of goods and services determine what is produced and the price that will be charged.
Supply and demand
The basic characteristic of this economy is that resources are privately owned and decisions are made by the people themselves.
The Market Economy
Markets enable mutually beneficial exchange between producers and consumers, and systems that rely on markets to solve the economic problem
Market Economy
In a _______, resources are allocated through the interaction of free and self-directed market forces.
Free market economy
The system depends on prices set by the conditions of demand and supply.
Market Economy
In this system, the main institution within which all economic activities are situated in the market.
Market Economy
It is simply where buyers and sellers meet
Market
The market system cannot always regulate itself and thus is not able to arrive at the desirable allocation of resources.
Market failures or market imperfections
Only one seller exists in the locality
monopoly
Means of production and distribution are privately owned.
Market Economic Systems
There are no longer pure command systems or pure market systems and while there may still be pure traditional systems they are confined only to small communities.
Mixed Economy
Mixed economies may have a distinct _______, where resources are allocated primarily by market forces, such as the grocery sector of the UK economy.
Private sector
Mixed economies may have a distinct______, where resources are allocated mainly by government, such as defence, police, and fire services.
Public sector
Economic systems can be evaluated in terms of how_____they are in achieving economic objectives.
Efficient
- Combination of a market and a command economy
- Government takes of people’s needs
- Marketplace takes care of people’s wants.
Mixed economy
Methodologies of Economics
Positive Economics
Normative Economics
It is an analysis of economic behavior that uses economic theory and empirical analysis to explain what is or what happened.
Positive Economics
It seeks to predict and explain economic phenomena and describes facts and data in the economy. It does not value economic judgment.
Positive Economics
It incorporates ethics and value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a goal.
Normative Economics
It is concerned with what one believes ought to be. Hence, it deals with the appropriateness of an economic outcome or policy.
Normative economics
Stages of Scientific Approaches to Economics
Observation
Definitions and Assumptions
Deductions
Empirical Testing
An analyst should be able to recognize conditions, behaviors, and events in the environment. By simply looking around, he shall be able to obtain information necessary to analyze an economic principle.
Observation
The analyst should describe the specific uses of the study and the peripheral conditions which affect the economic behaviors which are being studied.
Definitions and Assumptions
These are hypotheses or theories presented for empirical validation. They are temporary conclusions made, based on one’s observations and are still subject to the presentation of evidence.
Deductions
It starts with a set of axioms about economies and how they work, and relies on these principles to explain individual cases or events.
Deductive Economics
It is a staple in any introductory economics course, is an example of deductive reasoning because it involves a set of generally accepted principles about demand and supply.
Supply and demand analysis
______ in economics starts with a generally accepted principle and proceeds to the specific.
Deduction
Deductions have to be tested as to their validity and correctness.
Empirical Testing
The presentation of ______ will be the basis of rejecting or accepting a hypothesis.
Empirical evidence
The evidence gathered consists of _____ which is used to verify one’s guesses.
Statistics
In the Philippines, the ______, ________, ______, and even the municipal and city halls are the government agencies which serve as major sources of statistics.
- National Census and Statistics Office
- NEDA
- Central Bank
Branches of Economics
- Macroeconomics
- Microeconomics
It deals with the economy as a whole, or with the basic subdivisions or aggregates that make up the economy
Macroeconomics
It is a collection of specific economic units that are treated as if they were one unit
Aggregate
It **includes measures of total output*(, total employment, total income, aggregate expenditures, and the general price level.
Macroeconomics
It is concerned with specific economic units and a detailed consideration of the behavior of these individuals units
Microeconomics
It looks at specific economic units. It is concerned with the individual industry, firm or household and the price of specific products and resources.
Microeconomics
It is a study of price system, the individual consumer, the individual firm. It is the division of Economics that studies the economy in parts
Microeconomics
