Welcome to economics Flashcards
What is economics
Economics is the study of how society manages its scarce resources
Microeconomics
Microeconomics is the study of the choices that individuals and businesses make.
E.g. Consumer decision making, households
Macroeconomics
Macroeconomics is the study of the performance of the national economy and global economy.
E.g. employment, output, inflation rates
Time
Time is a scarce resource. Certain things are less important than others.
Time is limited so you need to give up something because of scarcity.
Some decisions are more important than others
What are the four economics of individual choice
Scarcity, Rational Decisions, Opportunity Cost, People usually exploit opportunities to make themselves better off
Scarcity and why does scarcity occur
Scarcity is the gap between scarce resources and limitless wants
E.g. If the government decides to spend more money on health then they have less money to spend on agriculture
Scarcity occurs because unlimited wants and limited resources lead to choices or trade-offs
What is the economic problem
The economic problem is to match limited resource to unlimited wants.
The result is you need to make trade-offs
Economic Questions and what problems are they referred to as.
What?: What goods and services are to be produced
referred to as the allocation problem
How?: How goods and services are to be produced. Referred to as the production problem
Whom?: Who are the goods and services to be produced for. Referred to as the distribution problem
opportunity cost
The highest valued alternative forgone.
The opportunity cost is the thing you give up.
E.g. By coming to class someone missed the chance to go to the gym
Time and cost are not mutually exclusive
Rational Choices
Scarcity results in choices
A rational choice is one that compares costs and benefits while achieving the greatest benefit over cost.
E.g. I might feel that feeling fitter and healthier outways the benefits of having €50 so I would keep going gym
People usually exploit opportunities to make themselves better off
Most people would go with the option that benefits them more
E.G. Buy 1 get 1 free, Living social offers, early-bird concert tickets
Positive Statement
A positive statement is about what is.
A positive statement might be right or wrong but we can test it by checking it against the facts.
E.g. Our planet is burning because of the amount of coal that we are burning
Normative statement
Are valued judgements, statements about what ought ought to be or should be.
Policy goals are normative staements
E.g. There ought to be free helathcare for everyone.
Positive statement vs Normative statement
Positive statements are facts which can be proven true or false
Normative statements are a wishlist. There is no way to prove a wish true or false
