Unit 1 - Fundamentals Flashcards
Opportunity costs
These are what must be given up in order to gain something else.
What is the human decision-making process?
It means weighing alternatives and resolving conflicting goals.
Factors of production
These are resources which, from an economic standpoint, are required for the production of goods.
Land, labor and capital.
Land
All the natural resources produced by earth such as underground mineral deposits, marine fish stocks etc
Labor
Is the physical and mental performance of individuals that goes into any production process.
Capital
Refers to the facilities and equipment required for producing goods and services.
For each company, there are 3 basic questions:
- Which goods and services should be produced?
- How much of those goods and services should be produced?
- Who should recieve the produced goods and services?
Market
Is a collection of buyers and sellers that determine the price of goods and services through potential or real interactions.
Goods
This is a generic term for products (tangible goods) and services (intangible goods).
Market economy system, how does it work?
The price and quantity of goods are determined by the joint interaction between buyers and sellers.
Decentralized decisions made by numerous companies and households.
Centrally administrated economy, how does it work?
Activity is directed by a central government autority.
Economic cake
This image is used to describe the sum of the economic activities of all persons in an economy.
Microeconomics
Deals with the behavior of individual economic entities and their interaction with the markets.
Macroeconomics
Deals with variables regarding the economy as a whole such as the unemployment rate, interest rate levels, or price increases.
Saving paradox
The microeconomic increase in the propensity to save which leads to a reduction in overall economic wealth.
Inductive method
Scientific method for gaining knowledge by drawning conclusions from empirical, individual observations about the general.
Deductive method
Scientific method for gaining knowledge in which conclusions are drawn from the general to the particular.
Falsification
The refutation of a scientific theory or hypotesis through a counter-example.
Omitted variable
Is a factor that has not been taked into account and that can explain the results of the investigation.
Natural experiment
An empirical research method in which the research units are divided into an experimental group and a control group based on natural events that cannot be controlled by the researcher.
Laboratory experiment
Is a man-made experimental arrangement in which a scientist exercises specific control and can exert influence.
Why lab experiment have an advantages over empirical work?
They are flexible and repeatable.
Model
Image of the real world in which details irrilevant to the investigation of a specific question are excluded based on a set of assumptions.
Positive analysis
Maked verifiable statements to describe the relationship between cause and effect.
Describe how the world actually is.
Normative analysis
Is concerned with the examination of the following question “What should be?”
Are prescriptive and aim to show how the world should be.
Cannibalization effect
Competition and partial substitution of an existing product due to the marketing of a new product by the same supplier.
Platform economy
Internet-based business models that connect providers with interested parties or customers in a digital marketplace.
How can it happen that economist contradict each other?
Economist disagree on whether a positive theory for how the world works is actually valid.
Economist have different normative views on how the world should be and what politics should strive to achive.
