Section1 Flashcards
Scarcity
Scarcity means that society has limited resources and cannot produce all the goods and services people wish to have.
“cake”
Economics
Economics is the study of how societies use scarce resources to produce, consume, and distribute goods and services to maximize societal well-being and future societies.
Is a social science.
Efficiency
Efficiency refers to society getting the most it can from its scarce resources.
Equity
Equity is the fair distribution of economic prosperity among the members of society.
Prosperity = Wohlstand, Erfolg, Reichtum
“Divide the cake”
Opportunity Cost
The opportunity cost of an item is what you give up to obtain it, including both monetary costs and time.
Trade-off
A trade-off is the balance achieved between two desirable but incompatible features or goals, such as leisure vs. work.
Market Economy
A market economy is an economic system where production and consumption are determined by firms and households based on supply and demand.
An economic system in which resources are allocated
through the decentralized decisions of a variety of firms and individuals who
interact in the markets for goods and services.
Planned Economy
In a planned economy, the government makes all decisions about the production and distribution of goods and services.
Rational Thinking
Rational thinking refers to making decisions by comparing the marginal benefits and marginal costs of actions.
Neoclassical microeconomics (mainstream economics) assumes that humans are
rational and maximize their individual self-interest.
Behavioural Economics
Unlike neoclassical economics, behavioural economics:
- considers psychological factors
- recognising that individuals are not always rational and maximize their individual self-interest.
Resources
Land (natural resources, e.g. iron ore or oil)
Labor (human efforts, e.g. hours of worker in factory)
Capital (production equipment and structures, e.g.
machinery; money)
Every society has to resolve basic economic problems:
- Which goods to produce and in what quantities?
- How to produce the goods, which resources and what kind of
production technology should be used? - For whom are the produced goods? Who will benefit from the
economic efforts: the workers, the shareholders or the landlords? - How to produce and consume goods in a sustainable way?
Factors that Influence Well-Being
Well-being encompasses being in good health, feel happy and satisfied with life, have good
material living conditions, live in a sustainable socio-economic as well as natural system.
OECD Better Life Index
Subjective and objective indicators that captures 11 dimensions of well-being: housing, income, jobs,
community, education, environment,
civic engagement, health, life
satisfaction, safety and work-life
balance
HDI = Human Development Index
The Human Development Index (HDI) was developed by the UNDP.
HDI has three dimensions:
1. Life expectancy index
2. Education index
3. Income index
People and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone.