Introduction to economics definitions Flashcards
social sciences
academic disciplines that study human society and social relationships
microeconomics
branch of economics examining behaviour of individual decision-making units in the economy
macroeconomics
branch of economics examining the economy as a whole to obtain an overall picture of the economy
scarcity
the condition in which available resources are insufficient to satisfy unlimited human needs and wants
choice
selecting among alternatives due to scarcity of resources
efficiency
making the best possible use of scarce resources to avoid resource waste
allocative efficiency
an allocation of resources that results in producing the combination and quantity of goods and services most preferred by customers
equity
the idea of being fair or just, often used in connection with income distribution
economic wellbeing
refers to levels of prosperity, economic satisfaction and standards of living among members of a society
sustainability
refers to the long-term maintenance or viability of any particular activity or policy
interdependence
refers to the idea that economic decision-makers interact and depend on each other
intervention
typically refers to government intervention, where the government becomes involved with the workings of markets
resources
factors of production, used by firms as inputs in the production process
factors of production
all resources, or inputs (land, labour, capital, entrepreneurship) used to produce goods and services
economics
the study of choices leading to the best possible use of resources in order to best satisfy unlimited human needs and wants
land
consists of all natural resources, including all agricultural and non-agricultural land, and everything above or below land
labour
includes the physical and mental input that people contribute to the production of goods and services
capital
refers to resources that can provide a future stream of benefits
physical capital
a man-made resource used to produce goods and services that enable production of more output
human capital
refers to the skills, abilities and knowledge acquired by people
natural capital
expand meaning of ‘land’, including everything involved in land, as well as additional natural resources in the environment
financial capital
refers to investments in financial instruments, like stocks, bonds and funds
entrepreneurship
a special human skill possessed by some people, who organise the other factors of production, innovating and taking risks
opportunity cost
the value of the next best alternative that must be sacrificed in order to obtain something else
free good
a good that is not scarce, and therefore has zero opportunity cost
economic good
any good that is scarce, and has an opportunity cost greater than zero
resource allocation
assigning available resources to specific uses chosen among many possible alternatives
redistribution of income
when income distribution or output changes so that different social groups now receive more or less than previously
distribution of income
idea concerned with how much of an economy’s total income different individuals or groups in a population receive
government intervention
where the government changes the allocation of resources (and distribution or output and income) from what markets would have achieved on their own
free market economy
an ‘ideal’ economy based on the market approach to economic decision-making, involving private sector ownership and decision-making
planned economy
an economy where all decision-making is carried out by government planning, rather than reliance on prices determined in markets
mixed economy
an economy that combines the command approach with the market approach to resource ownership, decision-making and rationing
rationing
a method used to apportion something between its interested users
model
simplified representation of something in the real world being investigated that allows us to focus on important relationships
Economic growth
refers to increase in the production of goods and services, as resources are rearranged so as to be more valuable
Actual growth
increase in the real national income of the economy (movement inside curve due to increased demand and long-term productive capacity)
Potential growth
increase in the productive capacity of the economy (curve itself shifts), due to greater quantity/quality of resources of new technology.
Consumer goods
Goods that satisfy present wants/needs
Capital goods
Goods that satisfy future wants/needs, extending production possibilities
Leakages
money or resources removed from the main flow of income, through savings, taxes, or imports
Injections
money of resources added to the main flow of income, through investment, gvt spending or exports
Closed economy
an economy with no imports/exports, with only a four-level model
Open economy
An economy that is freely importing/exporting, containing all 5 levels
Market
any kind of arrangement where buyers and sellers of goods, services or resources are linked together to carry out an exchange
Demand
the various quantities of a good or service the consumer is willing and able to buy at different possible prices during a particular time period, ceteris paribus (about behaviour of buyers of goods/services/resources)
PPC
represents all combinations of the maximum amount of 2 goods that can be produces by an economy, given its technology and resources, where there is full employment of resources and efficiency in production.
Production possibilities
all possible combinations of maximum amount of 2 goods that can be produced by an economy, given a fixed and unchanging resources and technology, where there is full employment of resources and efficiency in production.
Logic
a method of reasoning which involves making a series of statements each of which is true if the preceding statement is true.
Hypothesis
An educated guess, indicating a cause-and-effect relationship about an event. Predictions are made through empirical evidence.
Empirical evidence
Real world information, observation and data obtained from our senses and experience
Theory
A general explanation of a set of interrelated evens, usually (though not away) based on several hypothesis that have been tested successfully.
