THE NATURE OF ECONOMICS Flashcards
Economics
Economics is a social science which studies the behavior and decisions made by people as they try to allocate scarce resources in order to satisfy their unlimited wants
what are 3 things economics deals with
- the allocation of scarce resources and the
creation of wealth - the production, distribution and
consumption of goods and services - the behavior, interactions and welfare of
those involved in the process.
microeconomics
Micro-economics involves the small elements of the economy (individual).
macroeconomics
Macro-economics studies the economy as a whole and deals with issues that affect the entire economy (such as unemployment, growth rate, gross domestic product and inflation).
economy
An economy refers to the distinct reason where economic activity for individuals takes place (production and consumption of goods and services and the supply of money)
what are 2 things an economy deals with?
- it deals with the organization of resources
2. it aims to satisfy the needs and wants of society
what are the main economic agents?
- households
- firms
- government
scarcity
Scarcity means limited supply. This means that consumers will never be fully satisfied with what they already have ( the central problem of economics )
opportunity cost
the next best alternative given up when a choice is made
efficiency
efficiency refers to a situation where resources in the economy are being used. This is refers to as full employment of resources
inefficiency
inefficiency describes a situation where some resources are unemployed. This means that the resources are not being used in the production of goods and services.
free goods
one that is readily available to customers that they do not pay nor make a sacrifice to use
economic goods
one that must be paid for and the consumer will not have to sacrifice another good in order to consume it
objectives of the economic agents
consumers - maximize satisfaction
producers - maximize profits
government - maximize welfare of citizens
economic questions
what to produce? how to produce? for whom to produce
