Topic 1: Thinkining like an economist Flashcards
What is Relative Scarcity
Relative Scarcity is the basic economic problem which states that we have unlimited needs, but limited resources to fulfill those needs.
Define Opportunity cost
The cost of other alternatives when one alternative is chosen
What is Cost-benefit analysis
A cost-benefit analysis is a matter of adding up the direct and indirect cost of a particular decision in both short and long term, and comparing these against the total value of the anticipated benefits
What does a Cost-benefit aim to do
- Aims to ensure that the benefit of a decision would out weigh the cost
- Compares the cost of the decision to the benefits it provides
What is the traditional view of a consumer behavior?
- Consumers at rationally (think logically about their purchases)
- Have priorities or ordered preferences
- Consumers make informed decisions
What is the evolution of Consumer Behavior
- Consumers don’t always seek to maximize personal benefit or self interest.
As not everyone has the right knowledge to act rationally, and is dependent on psychological and emotional circumstance
What is the traditional view of business decisions making
- Business behavior looks at the factors influencing the decisions of firms regarding the production and sales of a particular good and services.
- Maximize revenue
- Minimize production cost
What is the evolution of Business behavior
- Have concern about environmental sustainability
- The need for Research and development
- A need for community involvement
- Considers Gender equality
What is Market Capitalism
Market Capitalism refers to the economic system in which capital goods are owned by private individuals or businesses
The production of goods and services is based on the supply and demand in the general market
What is a Planned socialist system
A planned socialist system is characterized by social ownership and democratic control of the means of production
What is a Market Socialist system
A market socialist System is an economic system representing a compromise between socialist planning and free enterprise, in which enterprises are publicly owned.
But production and consumption are guided by markets forces rather then by government planning
What are the three key economic questions
What to produce
How to produce
For whom to produce
Explain “What to Produce”
This is concerned with how we allocate our scarce resources, in deciding what good or service is to be produced
Explain “ How to produce”
This ask what Combination of scarce resources will we use to produce those goods and services that we have decided to produce
Explain “For whom to produce”
This concerned with how the goods and services are allocated or distributed to society
