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OJA > OJA 1 - Basic Concepts in Economics > Flashcards

OJA 1 - Basic Concepts in Economics Flashcards

1
Q

What is scarcity?

A
  • It is the basic economic problem, it is the gap between limited resources and theoretically limitless wants.
  • it is the state of being scarce (=insufficient for the demand), or in a short supply, shortage
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2
Q

What helps to determine the best allocation of resouces?

A

Price and demand.

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3
Q

What are opportunity costs?

A

It is the cost of the next best alternative, it is the missed opportunity for another one.

What I am giving up in order to have something else (I am studying now and what I am giving up is the money I could make from working)

But of course you can partially earn them by scholarship, part-time job, parent’s money

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4
Q

What is a trade-off?

A

It is a situation in which you accept something you don’t like/want in order to have something that you want.

It is a trade-off between something and something

Choosing one thing requires trading-off one goal/want/need for another

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5
Q

What are incentives?

A

It is the motivation, rewards/penalties associated with choices

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6
Q

What are side effects?

A

It is related to negative & positive externalities, when making a decision you must think through the full scope of the effects of that decisions otherwise incentives may not work or even be counter-productive

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7
Q

What do economics study?

A

It is a social science, it studies human behaviour, however it is not an exact science because it uses models, assumptions, predictions and estimations

It studies choices, usage and allocation of scarce to produce goods and services and distributing them among people in order to satisfy human wants and needs

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8
Q

What is the difference between needs/wants and resources?

A

Needs and wants are INFINITE (unlimited)

Resouces are FINITE (limited)

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9
Q

What is behavioral economics?

A

It is a study of psychology, it relates to the economic decision-making processes of individuals and institutions, especially studies irrational choices

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10
Q

What is Maslow’s Hierarchy of Needs?

A

It is a theory of motivation which states that 5 categories of human needs dictate an individual’s behavior

Those needs are in pyramid shape beginning with psychological needs and moves up to safety, love and belonging, esteem and at the top is self-actualization

A person can only move on the higher-level needs when their basic needs are adequately fullfiled

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11
Q

What renewable resouces do we have?

A

Biomass, hydropower, geothermal power, wind energy, solar energy

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12
Q

What non-revewable sources do we have?

A

Fossil fuels and nuclear energy - oil, natural gas and coal

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13
Q

How should we use limited, scarce sources?

A

We must decide which of these resouces to use and how to use them efficiently

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14
Q

What is a biomass?

A

It is a renewable resource, it is the organic material from plans or animals (wood, sewage, ethanol)

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15
Q

What is solar energy?

A

It is a renewable resource, it is the light and heat that come from the sun, the sunlight is converted into electrical energy by for e.g. photovoltaic panels (PV)

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16
Q

What is geothermal energy?

A

It is a renewable resource that comes from the heat within the earth’s core

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17
Q

What is a hydropower?

A

It is a renewable resource, it uses the natural flow of moving water to generate electricity

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18
Q

What is a wind energy?

A

It is a renewable resource that generates electricity by turning wind turbines

19
Q

What are the current issues related to renewable resources?

A
  • it is not always working (e.g. solar energy works only when it is sunny)
  • it is not possible to store it
20
Q

What are current issues related to non-renewable resouces?

A
  • they are limited, we will run out of them one day (esp. natural gas and coal)
  • they are creating waste, such as carbon dioxide, CO2, which has an impact on our health, enviroment and it causes global warming
21
Q

What is the difference between efficient and effective?

A

Efficient = achieving maximum productivity with minimum wasted effort/expense, working in a well-organized/competent way

Effective = successful in producing a desired/intended result (not necessarily in efficient way)

22
Q

What are the reasons for scarcity?

A
  • unavailability of resources
  • inefficient use of resources
  • lack of adequate technologies for exploitation (resources)
23
Q

What are the 3 fundamental economic questions?

A
  1. What is produced?
  2. How is it produced?
  3. Who gets to consume it?
24
Q

What is produced?

A
  • Goods (used or consumed) - mostly represent things/items/articles
  • Services - material (repairs) or personal (improving the quality of life)
25
Q

How is it produced?

A

By Economic sectors, by technology, local or imported, enviromental concerns

26
Q

Who gets to consume it?

A

Economic subjects, users, consumers, at home or abroad

27
Q

Who are economic subjects/agents?

A

Households (individuals), firms (businesses), state/government (country)

28
Q

What do macroeconomics study?

A

It studies behaviour of a national or regional economy as a whole - on a national level

Explains the economic reality in aggregates - in totals

29
Q

What do microeconomics study?

A

It studies the behaviour of subject of smaller size than the state, studies how households & companies behave in terms of production and consumption, sale and purchase, etc.

30
Q

What is the difference between economics and economy?

A
  • Economics = social science that studies human behaviour
  • Economy = a complex of applied economic activities related to the production, exchange and consumption of goods and services within a country or area
31
Q

What economic sectors do we have?

A

1) type of production (production, service sector)
2) ownership (public, private, voluntary sector)
3) stage in production (primary, secondary, tertiary, quaternary)

32
Q

What are resources?

A

These are all the materials available in our environment which help us to satisfy our wants and needs

33
Q

What factors of production do we have?

A

1) LAND (e.g. natural resources, soil)
2) LABOUR (work of people)
3) CAPITAL (financial assets - goods, money, buildings)
4) ENTREPRENEURSHIP (risk-taking, organizing and biding all other factors together for profit)

34
Q

Who owns factors of production/is reposible for distribution?

A

It depends on the economic system of a country:
• when it is a market economy, it is owned by private owners and
• if it is a command economy it is owned by the state and is responsible for what is to be produced

35
Q

What are payoffs?

A

The results that reward you for your work (e.g. money)

36
Q

What is analysis paralysis?

A

It is the inability to make a decision due to over-thinking problem - having too much data makes it difficult for us to pick one

37
Q

What is marginal benefit/utility?

A

It is additional satisfaction that comes from consuming an additional unit of a good/service.

38
Q

What is marginal analysis?

A

It is analyzing the benefits of one additional unit vs. the costs of that unit (e.g. in production, consumption)

39
Q

What is diminishing marginal utility?

A

That means when the consumption of units increases, the marginal utility decreases (the satisfaction is smaller)

e.g. when I am hungry the first bite of pizza feels good, I derive very high utility from it, however, with the fourth bite the utility gesta lower because I am not that hungry anymore.

A consumer may be willing to pay more for the first bite of pizza than fort the second or third due to the decreased utility from it.

40
Q

What is a sunk cost?

A

It is a cost that has already been incurred and cannot be recovered

e.g. A company invests in a project but the results don’t appear and the company keeps the project alive with hopes and it costs them more money - instead, they should have closed on the project.

41
Q

What is a sunk cost dilemma?

A

It describes the emotional difficulty of deciding whether to proceed or abandon a project when time and money have already been spent, but the desired results have not been achieved.

42
Q

What is the sunk cost fallacy?

A

It happens when a company continue a behaviour or endeavour as a result of previously invested resouces (time, money, effort)

A company is likely to keep investing into a project because they have already spent some money on it, even though continuing is not the best idea

43
Q

What are economies of scale?

A
  • These are cost advantages gained by companies when production becomes efficient
  • They can achieve economies of scale by increasing production and lowering costs - costs are spread over a large number of goods

e.g. bulk orders, selling 1000 T-shirts a month

OJA (5 decks)

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