World Economy Flashcards
It is a branch of knowledge concerned with production, consumption, and transfer of wealth
Economics
Refers to the choices made by large groups such as countries (ex. growth, employment, etc.)
Macro-economics
Refers to how individuals make economic decisions
Micro-economics
As a society, what must we figure out?
a. What to produce? — Make
b. How much to produce? — Quantity
c. How to produce? — Manufacture
d. For whom to produce? — Who gets what
e. Who gets to make these decisions?
These are used to make other goods
Capital goods
These are final products that are purchased directly by the consumer
Consumer goods
Can also refer to things used to make other goods
Resources
4 Factors of Production
- land, water, natural gas, oil, trees
- labor / manpower
- capital - things we use to make things (ex. brainpower, ideas, innovations)
- entrepreneurship - investment
What we need to make goods and services
Factors of production
Company that makes goods and/or delivers services
Producer
People who buy goods and services
Consumers
Fundamental problem in Economics
Scarcity - unlimited wants and needs but limited resources
Wants vs Needs
Wants - luxuries
Needs - things people must have TO SURVIVE
Maslow’s Hierarchy of Needs
- Self-actualization
- Esteem
- Love and Belongingness
- Safety Needs
- Physiological Needs
Picking one thing over all the other possibilities
Trade-offs
Value of the next best choice
Opportunity cost
Additional cost of the next unit produced
Marginal cost
Difference between total costs and revenues
Profit
Traditional Economic System
> based on goods, services, and work
very little division of labor or specialization
lacks potential to generate surplus
ex. barter and trade
Market Economic System
> based on free markets
very little government interference — control over resources only
ex. Laissez faire
Command Economic System
> dominant centralized authority - usually the government controls a significant portion of the economic structure
Mixed System
aka Dual System
AKA perfect competition, defined by a large number of small firms
Pure competition
Large number of small firms selling similar but high differential products
Monopolistic competition
