Introduction Flashcards
What is economics?
economics is the study of how individuals, businesses, societies, etc make choices to satisfy their unlimited wants and needs, with their limited amount of resources. But this in itself is not a definite definition of economics.
Differentiate between macro and microeconomics.
Microeconomics is concerned with how individuals, smaller businesses, and small groups make choices to satisfy their wants and needs, with the limited resources they have.
While macroeconomics is concerned with larger businesses, entire economies, and even the world, it helps us understand why certain people have jobs and some do not, why the prices of certain goods increase with time, etc.
Why are the two methodologies or approaches to economics?
- Deductive approach:
-> With this approach a set of ideas, theories, or assumptions are put into place, through logical conclusion these assumptions are used to come up with a hypothesis, this hypothesis is tested against facts to see if it stands or is true. If the hypothesis is tested several and multiple times and still stands or is still true then said hypothesis is taken as law - Inductive approach:
-> With the inductive approach an idea or theory is made from the observation of facts, and a hypothesis is made, through these questions, interviews, statistics, etc this hypothesis is considered a Law.
Differentiate between positive and normative economics.
Positive economics deals with statements that can be proven as right or wrong or as facts or not.
Normative economics deals with economic statements that cannot be proven true or false.
What are the basic economic problems?
- Scarcity:
-> Scarcity is a phenomenon that occurs when there is a limited supply of resources in relation to the demand for said resources, which leads to making choices on how to use said limited resources. - Choice:
->Choice comes as a result of scarcity and answers the economic questions of :
-What to produce?
-When to produce?
-How to produce?
-For Whom to produce?
With limited resources, choices will have to be made to decide on which needs or wants should be satisfied rather than others, which leads to opportunity costs. - Opportunity cost:
-> Opportunity cost comes as a result of choice, opportunity costs are the wants and needs, or the cost of said wants and needs, that are sacrificed or forgone to satisfy other wants or needs
Explain the production possibility curve.
The PPC is a graph that displays the concepts of scarcity, choice, and opportunity cost, it shows what products a country or society can produce with its current resources. This graph makes use of certain assumptions including:
- There is a level of Stock of resources
- The country or society can produce only two goods
- The country or society can produce said goods with their current resources
- The technology of the country or society is constant
Draw and explain the graph or the Production possibility curve(PPC).
Explain the following points:
-> The y-axis
-> The x-axis
-> he points a -g
-> The potion X
-> The slope Y
-> Which parts of the graph show scarcity, choice, and opportunity cost
What is the marginal rate of transformation?
It is an economic tool that helps us understand or measure how much of one resource we have to sacrifice to obtain another
What is an economic system? and What are the types of economic systems that exist?
An economic system refers to rules and regulations that govern economic activities and the right to own property.
The economic systems that exist include:
-> The Traditional economic system
-> The Planned/command economic system
-> The Market economic system
-> The mixed economic system
What is the traditional economic system and what are its advantages and disadvantages?
The traditional economic system is one where the rules of production and distribution of society were already laid down by their ancestors in the form of traditions and customs which are followed and passed down from generation to generation.
Advantages:
-> There is an almost even distribution of wealth as everyone shares the available resources
-> There is no wastage or over-exploitation of resources
-> This economic system solves the problems of inflation and deflation as there is little use for money
Disadvantages:
-> There is discrimination when it comes to property rights
-> There are low living standards due to low outputs and a lack of variety of goods and services
-> Exchange is difficult due to the little use of money
What is the market economic system and what are its characteristics, advantages, and disadvantages?
It is an economic system where demand and supply determine the allocation of resources with little or no intervention from the state, the level of production and distribution of goods and services depends on the purchasing power of the people.
Characteristics:
-> Ownership of Property: In this system, individuals own resources like land, labor, etc. Individuals have the right to own, use, control, and dispose of their property as long as it does not violate the rights of others, theses individual can sell their property in exchange for money and decisions are decentralized.
-> Freedom of choice and enterprise: In this system, individuals are free to do any business they please and leave when they please, and consumers are allowed to buy from any place at any time.
-> Self interest: In this system both the consumer and producer aim to protect their self-interest. The producer aims to maximize profit, while the consumer aims to maximize satisfaction.
-> Competition: There is a lot of competition in this system as producers are less willing to raise their prices higher than that of their competitors, which benefits the consumer
-> Little or no government Intervention: In this system the government only steps in to provide goods and services that cannot be provided or will be inefficiently provided by individuals. The also put in place laws to protect property rights.
Acrostic: For Sure Capitalis Love Ownership
What is the planned economic system and what are its advantages?
The planned/socialist economic system is an economic system in which the government owns the means of production and resources are allocated based on the needs of the people.
Characteristics:
Choices:
Economic choices are all handled by the government
Little to no intervention of the private sector:
The government handles choices and decision making limiting the involvement of the private sector
State Ownership:
The government/state owns the means of production and consumers are limited to owning only a few consumer products.
