Test1 Flashcards
What is economics
A social science that is concerned with the way that society chooses to use it’d scarce resources assuming that these resources have alternate uses for both present and future consumption
What did Adam Smith believe
Is the people who will own and control a majority of the nations resources
What kind of economist is Adam Smith?
A classical economist
What is the invisible hand theory
ADAM SMITH—->WEALTH OF NATIONS
NO government role in the economy invisible hand will guide the economy in the way it should go
What did Keynes believe?
Government should own and control resources
GOVERNMENT PROVIDES BASIC NEEDS
Won’t last for a long time
Milton Friedman
Classical economist made Adam Smith’s ideas more modern
Macroeconomics
Positive problem solver—->gather all facts and get solution based ONLY on these facts
Microeconomics
Normative problem solver—-> gather all the facts and get solution beyond them like considering feelings
What is a theory
An expressed relationship regarding variables
What are the three parts to a theory?
DEFINITION GIVEN(conditions under which the theory is true) HYPOTHESIS(best guess as to the relationship that exist among variables)
What is the degree/amount of collectivism?
The amount of control the government has over its resources
Communist= leaders will keep the nation communist b/c they are living so well Socialist= leaders will have a lot of control over resources to provide for common good Capitalist= leaders have a little bit of collectivism for safety
How will the resources be used?
Producing capital products and/or consumer products
Communist= use a majority of their capital to produce weapons
Socialist= to produce consumer products
Mixed(UNITED STATES)= produce both capital and consumer products
Who will receive the product?
Who will buy/consume it
Communist= those in power Socialist= everyone Capitalist= those who can afford it
What is the purpose of capital product?
To produce something else
Ex: money, tools, pencils
What are the 4 factors of production?
LAND
CAPITAL
LABOR
ENTREPRENEURSHIP
What is land
All property resources that ARE NOT MANMADE
What is capital
MANMADE property resources
What is labor
Physical work
What is entrepreneurship?
Willingness to take a risk. Creativity and imagination.
What nations have all 4 factors of production?
ALL NATIONS HAVE THE FACTORS OF PRODUCTION
What is meant by the 4 facilitating factors?
A nation will be able to produce more quantitatively and qualitatively
What are the 4 facilitating factors?
Ps. You can only find all 4 in a CAPITALIST NATION
- Emphasis on Advanced technology
- Specialization
- STABLE medium of exchange
- A culture that is willing to accept change
Emphasis on advanced technology explanation
Technology is highly valued because it makes our lives easier and we get more from what we already have
What is specialization?
Nation will use their best advantage as in…
ABSOLUTE advantage- better at producing a product than any other nation
COMPARATIVE advantage- good at producing product but there are other nations just as good
What is a stable medium of exchange?
People have faith in their currency and are willing to work for the money
Why would a culture be willing to accept change?
If they see the need to improve production. Like computers and women in the work place
What are the 4 principles of capitalism?
- Voluntary Investment
- Profit Motive
- Private Property
- Limited government intervention
What is voluntary investment?
The people of the nation who provide the business with the money that they need to operate. Therefore when the company is deciding what products to produce, they will do so to please the people
What is profit motive?
The invisible hand. We buy things simply because we want or need them
What is private property?
Talents and abilities are protected by law; they are our private property
What is product?
Anything that is useful to someone GOODS- tangible SERVICES- intangible FREE- people are not willing to pay ECONOMIC- scarce and willing to pay
What does utility mean?
useful
FORM- offered in a form in which it is useful
TIME- offered at a time in which it it useful
PLACE- offered at a place in which it is useful
SERVICES- offering a service appropriate to people’s needs
What is wealth?
Must be transferable, must have utility and must be tangible
What are the 3 types of wealth?
Land ( must be transferable) Capital goods ( used to produce something else ) Consumer goods ( must be tangible )
What is money
A medium of exchange with a measure of value and stores value over time
What is value
Has a dramatic affect on decision making.
Intrinsic- personal value
Extrinsic- price tag value
What is liquidation?
When you convert wealth into money
What are production possibilities?
All possible ways that a nation can use its resources
What is opportunity cost?
Intrinsic value of an alternative that you give up in order to choose another opportunity
THE GOOD THING YOU GIVE UP
