What is Economics? Flashcards
Social Sciences
academic disciplines that studies human society and social relationships
Microeconomics
examines the behaviour of individual decision making units, consumers and firms
macroeconomics
examines the economy as a whole to obtain a broad or overall picture of the economy
scarcity
resources are insufficient to satisfy unlimited human needs or wants
choice
due to scarcity, resources can’t satisfy unlimited needs or wants, therefore a choice must be made about what will be produced and what will be forgone
efficiency
the best possible use of scarce resources to avoid waste
allocative efficiency
state in the economy where production represents consumer preferences. Using resources whilst pleasing the wants/needs of people
equity
the idea of being fair and just, rather than equal. People who have less are more supported by systems including the government and can be displayed in a gini coefficient.
economic wellbeing
this includes security (income, job, housing), ability to pursue your goals and have a satisfactory quality of life. additionally, the ability to maintain this overtime
sustainability
maintaining the ability of the environment and the economy to continue to produce and satisfy the needs into the future. This involves using resources in ways and at rates that do not reduce their quality or quantity into the future.
change
change is an important aspect in economics in Bothe economic theory and real life events
interdependence
idea that economic decision-makers interact and depend on each other (occurs on multiple levels - individual, nation, ect). No one is self-sufficient and we depend on one another for the achievement of their economic goals.
increase globalisation = increase interdependence
intervention
the government becomes involved with the workings of the market. It is often to achieve quite, sustainable economic wellbeing or efficiency. e.g. welfare payments
economics
the study of choices leading to the best possible use of the scarce resources in order to best satisfy unlimited human needs and wants
resource
what is used to produce a good or service
GDP
measure of the total wealth produced in a country in a year
factors of production - land
all natural resources including agricultural and non-agricultural land, as well as anything above and below the land. e.g minerals, oil reserves, forest, river
factors of production - labour
physical and mental effort that people contribute to the production of goods and services. e.g. teacher, doctor, farmer
factors of production - capital (physical)
manmade factor of production ( it itself is produces) used to produce goods and services. e.g tractor, machinery, factories
factors of production - entrepreneurship
human skill involving the ability to innovate by developing new ways of doing things and organises the other three factors of production
opportunity cost
the value of the next best alternative that must be given up or sacrificed in order to obtain something else
free good
a good that is not scarce and therefore has no opportunity cost. this does not include free benefits from the government because they still have to pay for it (like state schools)
economic good
any good that is scarce because it is a naturally occurring scarce resource (gold, coal, oil) or because it is produced by scarce resources.
resource allocation
assigning of available resources or factors of production to specific uses chosen among many possible alternatives
reallocation of resources
a change to resource allocation where different amounts of products are produced
overallocation
too much of a resource is allocated to produce a good or service
under allocation
not enough of a resource is allocated to produce a good or service
distribution of output
how much output different people receive and it depends on the distribution of income
distribution of income
how much income people receive this affects the distribution of output
redistribution of income
distribution of income or output changes so social groups receive more or less income/ output compared to their previous state
market method (free market economy)
decisions are made by individuals and consumers, the government is not involved. resources are owned by private individuals and its consumers and firms who make economic decisions be responding to prices determined in markets
command markets (planned economy)
resources (particularly land and capital) are owned by the government, which makes economic decisions on command (legislation and regulations)
mixed economy
real-world economies are a mix on a free market economy and a planned economy
government intervention
governments make decisions that effect the economy. it usually changes the allocation of resources which markets usually achieve on their own.
model
simplified representation of something in the real world. It allows is to focus on important relationships
economic growth
refers to the increase in the quantity of output produced in an economy over a period of time. It is often measure by GDP
circular flow of income model
model that shows the flow of resources from consumers to firms, and the flow of products from firms to consumers. As well as money flow consisting of consumers income from the sale of their resources and firms revenues from the sale of their products.
logic
reasoning which involves making a series of statements each of which is true if the previous statement is true. the truth of a final statement is based on the truth of the previous statements
hypotheses
an educated guess on a cause and effect relationship about and event.
ceteris paribus
idea that only one independent variable is being changed and the rest are being kept constant
empirical evidence
real world information, observations and data that we acquire through our experiences. this is used to support or reject hypotheses
theories
tries to explain and giver a logical explanation to WHY certain events happen. it attempts to organise complex and interrelated events and present them in a coherent way to explain why these events happen
laws
predicts about certain initial conditions and is primarily concerned about WHAT HAPPENS. it also has to have international validity (valid everywhere) and are the building blocks to theories.
refutation
to contradict something, disprove it or show it to be false
utility
satisfaction drom consuming something
marginal utility
additional satisfaction from each additional unit consumed until it reaches a point were you don’t want it any more even if it’s free
