Unit 1.1 Flashcards
To become proficient in articulating practical, morally grounded policies that advance social justice and economic well-being.
Define Economics
Study of production and goods and services
Microeconomics vs. Macroeconomics
Micro
- Study of small economic units (individual consumers, businesses, and individual industries)
- Focuses on the behavior of individuals
- Supply and demand
I.e Housing prices
Macro
- The entire economy, focuses on behavior on the economy as a whole
I.e unemployment rates in Canada, Inflation, GPD
Positive Statements
- Statements of fact
- Deals with facts that can be proven wrong (or have been proven wrong in the past)
- Descriptive statements: portray things as they are present or have been in the past
- Conditional statements: relative to cause and effect, if this happens this will also happen “If x occurs then y will happen” “Government-provided healthcare increases public expenditures”
Normative Statements
- Expresses opinions, what an economist or group of economists thinks should happen, based on their value judgements
- Derived from an opinion
- ‘Should’ ‘ought to’ ‘it is better to’
- Can be challenged (can’t say its not true because its opinion based)
Inverse vs. Direct Relationship
An inverse relationship exists between two variables moving in opposite directions, if one increases the other decreases, and vice versa.
Example: When the price of a product increases, the sales tend to decrease.
A direct relationship exists between two variables when an increase in one leads to an increase in the other and a decrease in one results in a decrease in the other.
Example: If the number of hours you work increases, your earnings also increase.
Fallacy of Composition
The fallacy of composition occurs when an individual assumes that what is true for themself is necessarily true for the whole economy.
Example: If an individual in a crowded stadium stands up to get a better view, it does not mean that everyone in the stadium will have a better view if they all stand.
Fallacy of Post - Hoc
The Post Hoc (Cause-Effect) Fallacy, is event B happens after event A, event B must have been caused by event A
Example: sun rises a few minutes after the rooster crows, therefore, the rooster crow must cause the sun to rise
Fallacy of Single Causation
The fallacy of single causation, one event has caused this entire event to happen,
Example: The stock market crash caused the great depression (not true there were many factors)
Opportunity Cost
The sum of all that is lost from taking one course of action over another. (I.e choosing to party rather than studying, is risking the cost of your grade)
Implicit Costs
Implicit costs are opportunity costs associated with resources that aren’t directly paid for but still have value. Implicit cost questions will always include “if” “would have” and “could’’. Implicit costs do not require a monetary payment.
Explicit Costs
Explicit costs involve direct monetary payments, such as rent, wages, and utility bills. Explicit questions typically include “you did” and “Michael spent x on rent”, anything implying you’ve already spent or have to spend is explicit. Essentially anything you can measure.
Factors of Product/Production Resources
Land I.e fertile soil, water, acres of land, and natural resources belong to the owner of the land
Renewable land - farmland, fish, forest
Finite land - oil & mineral deposits
Labour I.e physical and mental talents of people
Capital - goods that aid in the production of other goods I.e factories, machinery, equipment
Real Capital
Money Capital
Tangible vs. Intangible Resources
Tangible Resources: physical properties that you can touch and feel (same thing as real capital). You can easily gain tangible resources
Intangible resources: not physical things, more mental, studies, and results. I.e a country’s social and cultural value. Science and Technology, experience, education and training.
Capital vs. Consumer Goods
Capital goods (used to create more, by investing in capital goods you’re investing more consumer goods in the future) (Investment in the economy essentially your standard of living will increase) (typically produces consumer goods) (money, tools, equipment)
Consumer goods (things like cell phones and groceries, you are the end consumer of the goods)
Law of Increasing Relative Costs
When a supplier increases the production of a good, the opportunity cost of producing additional goods also increases. To produce an increasing amount of a good a supplier must give up greater and greater amounts of another good.
