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economics > the economic problem > Flashcards

the economic problem Flashcards

1
Q

Economic Methodology

A

The study of methods used in economic analysis, often involving the creation and evaluation of economic models.

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2
Q

social science

A

A branch of science that deals with the institutions and functioning of human society and the interpersonal relationships of individuals as members of society.

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3
Q

differences in methology from natural and other sciences

A
  • empirical evidence vs quantitative analysis
  • models vs assumptions
  • positive vs normative statements
  • value judgements
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4
Q

positive statement

A

factual and can be tested to be true or false

eg an increase in tax rates ultimately results in a decrease in total revenue

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5
Q

normative statement

A
  • includes a value judgement
  • opinions of how things should be
  • cannot be scientifically tested

eg we have to do more to help people.

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6
Q

value judgement

A

opinion about the relative merits of two or more states of the economy that is based on morals or aesthetics rather than logical argument or empirical evidence.
which is why they influence economic descision and policy

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7
Q

peoples views concerning the best option influenced by positive consequences

A

often measurable benefits that a decision is expected to yield. For example, if a policy is predicted to lower unemployment, this is a positive consequence that can influence people’s support for it.

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8
Q

how peoples descisons areinfluenced by moral and political judgements

A
  • involve a person’s beliefs about what is ethically right or wrong
  • judgments are subjective
  • based on personal values, societal norms, and cultural backgrounds.
    *

one might argue for higher taxes on the wealthy out of a belief in social justice and reducing inequality, which is a moral judgment.

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9
Q

nature and purpose of economic actvity

what is the central purpose for economic activity?

A

production of goods&services to satisify needs and wants

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10
Q

nature and purpose of economic actvity

economic activity

A

The actions that involve the production, distribution, and consumption of goods and services within an economy.

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11
Q

nature and purpose of economic actvity

needs

A

Needs are essential for survival, such as food and shelter,

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12
Q

nature and purpose of economic actvity

wants

A
  • something desireable
  • that can improve quality of life
  • eg a new phone
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13
Q

nature and purpose of economic actvity

goods

A

Goods are tangible items that satisfy human wants and needs

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14
Q

nature and purpose of economic activity

services

A

intangible activities that satisfy human needs and wants
eg hair dresser

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15
Q

nature and purpose of economic activity

economic welfare

how do we improve it?

A
  • economic well beingof an individual,group within society or an economy
  • satisfying peoples needs&wants can improve economic welfare
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16
Q

what are the key economic descisions?

A
  • what to produce
  • how to produce it
  • who will benefit from goods&services produced
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17
Q

key economic descisions

what to produce?

A
  • which goods and services should be produced
  • and **quantities **to meet the needs&wants of society to the best.
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18
Q

key economic descision

how to produce?

A
  • aiming to minimise costs&maximise profits
    • efficient production
  • how much intangible activities that do the sameeach factor of production will cost
  • helps decide between labour intensive production or capital intensive production
19
Q

who will benefit from goods or services?

A
  • Consumers who have purchasing power can benefit
  • willing and able to pay the price charged
    for a good or service will get the good or service.
20
Q

market economy

A
  • goods and services are purchased through price mechanism
  • in a system of markets
21
Q

command economy

(planned economy)

A
  • government officials or planners allocate economic rescources
  • to firms or other productive enterprises
22
Q

mixed economy

A
  • an economy that contains both large market sector
  • and large non-market sector in which planning mechanism operates
23
Q

economic system

A
  • where countries and governments distribute rescources and trade goods&services
24
Q

distribution

A

The process of making a product or service available for the consumer.

25
Q

economic efficiency

A

The use of resources so as to maximize the production of goods and services.

26
Q

economic rescources

what are economic rescources?

(factors of production)

A
  • Capital
  • Enterprise
  • Labour
  • Land
27
Q

economic rescources

capital

A

Physical: goods which can
be used in the production
process Fixed:Machines;
buildings Working:
finished or semi-finished
consumer goods

reward/incentive-interest from investment

28
Q

economic rescources

Enterprise

A
  • The
    entrepreneur is someone
    who takes risks,
    innovates, and uses the
    factors of production.

reward/incentive-profit an incenitve to take risks

29
Q

economic rescources

Land

A
  • Natural resources **oil, coal, wheat, water. **
  • or ** physical
    space for fixed capita** eg rent
30
Q

economic rescources

labour

A
  • Human capital
  • workforce of the economy
31
Q

environment as a scarce rescourse

why is it regarded as this?

A

There are only a limited amount of resources
on the planet.
* made up of renewable and non renewable rescources

renewable-can be replenished, so the stock level of the resources can be
maintained over a period of time.
non renewable- known as a finite rescourse eg oil which runs out as it is used,stock level decreases over time as it is used.

32
Q

how can the environment be managed?

A
  • preventing or
    limiting deforestation, or imposing fishing quotas.
33
Q

what is the basic economic problem?

A
  • scarcity
  • resulting from limited rescources and unlimited wants

scarcity means choices have to be made about how scarce rescources are allocated between different uses

34
Q

choice

A
  • choosing betweenalternatives when making a descision on how to use scarce rescoures
35
Q

how do choices have an opportunity cost?

A
  • when you make a choice bwteen different alternatives it is impossible t achieve both at the same time
  • therefore opportunity cost is involved(lost opportunity/rejected option)
36
Q

opportunity cost

A
  • the cost of giving up the next best alternative
  • (the rejected option/opportunity)
37
Q

what do economist assume?

A
  • that we are rational and we will make choices to maximise private benefit for our self interest
  • therefore, we will choose the best alternative available.
38
Q

what is a product possibility diagram?

(PPF)

A
  • Demonstrate different features of the economic problem
  • eg rescource allocation,opportunity cost,trade offs,unemployment of economic rescources &economic growth
39
Q

what do points inside PPF frontier mean?

A
  • they are productively ineffictient.
40
Q

what do points on PPF line mean?

A
  • means they are productivley efficient
41
Q

what is productive efficency

A
  • occurs when an economy produces on its production possibility frontier (PPF). This means it is impossible to produce more of one good without producing less of another.
42
Q

allocative efficiney?

A
  • where the price equals the marginal cost (MC) of production
  • MC is Total Cost (TC) from selling one additional unit of output change in total production costs.
43
Q

Why all points on the boundary are productively efficient but
not all points on the boundary are allocatively efficient

A
  • Productive efficiency occurs when goods and services are produced at the lowest possible cost.
  • indicating rescources are fully utilized and its impossible to produce more of one good without producing less of another(they are on boundary of PPF curve
  • allocative efficiency achieved when the production of goods and services aligns with consumer preferences.
  • goods and services must reflect what consumers mlst desire
44
Q
A

economics (4 decks)

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