Econ intro

normative economics

"Should be". Expression of economists values or personal views based on quantifiable evidence. Speculative/Theory Ex. Government obligation to provide public transport to relieve neg enviro and health effects of traffic. Key word: THEREFORE

Robert L. heilbroner

"The worldly philosophies", economic revolution as solution to survival in a society arises from problems of scarcity. Modern problem of human unpredictability

positive economics

"What is" focuses on observations and expressions based on purely factual evidence (proven) EX. Law of demand, appreciation of countries currency, increase prices, effect of taxation

John Maynard Keynes

1930s argued active government should step in during slums. Uncertainty among economic agents would lead to major swings in the overall level of demand. The goal/purpose of government is to maintain an atmosphere of stability

How is scarcity a result of limited resources and endless wants?

3 apples for 5 people

Land

A factor of production which includes all natural resources: such as minerals, oil reserves, underground water, forests, rivers and lakes. Natural resources are also called 'gifts of nature' or 'natural capital'.

Labour

A factor of production, which includes the physical and mental effort that people contribute to the production of goods and services.

On

A nation achieving its PP is producing at its full employment level of output a point ____ the line or curve

Inside

A nation not achieving full employment is producing at a point _____ its PPC

invisible hand

A phrase coined by Adam Smith to describe the process that turns self-directed gain into social and economic benefits for all

Market

A place where goods can be bought and sold and a price established.

Outside

A point _____ the PPC is unattainable because quantity and quality of resources is limited, but it is desirable

Efficiency

A state in which no one can be made better off without making someone else worse off. Output can't be achieved without increase in quantity and quality of inputs

Economy

A system for producing and distributing goods, and services to fulfill people's wants

Traditional Economy

An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.

economic growth

An increase in output of goods and services overtime. Illustrated as Outloud shift of the nations PPC. It's only possible with increase in quantity and quality of resources

How is Econ a social science?

Analyzes human interactions. Studies and explores the problems by human societies attempt to balance needs and desires with limited resources

Incentive

And economy that doesn't have viable ________ toward achieving efficient production will collapse eventually

factors of production

Another term for necessary scarce resources

Law of increasing opportunity cost

As the output of a product increases the opportunity cost of producing additional unit increases

Trade off

Axis represent _________ on a PPC diagram (hr playing video games vs hr working)

LLC (land, labor, capital)

Big three scarce resources/ factors of production

How and why do economist use the ceteris Paribus assumption when developing economic models?

By 'holding all things constant', the ceteris paribus assumption makes the analysis more manageable so the economists can focus on the effects of a specific hypothetical change.

What is the process of building models in economics?

Ceteris paribus. Economists use the ceteris paribus assumption to develop economic models.

Outside

Data points out side the line or curve on a PPC represent either a recession or economic growth

What does opportunity cost increase?

Drastically different choices. The use of different resources in different amounts of those resources/factors of production

market economy

Economic decisions are made by individuals or the open market. Free exchange

What is the distinction between economic growth and economic development?

Economic growth means an increase in real national income / national output. Economic development means an improvement in the quality of life and living standards, e.g. measures of literacy, life-expectancy and health care.

Socialism

Economic system implemented by Mel's China, stolen Soviet union and Castro Cuba. Goal is to move to an industrial and manufacturing econ from an agr econ. The mechanisms is total control of nations resources by gov

Birth of economics

Economics born in response to answer and deal with the complexity of economy from a scientific basis (modern/ post IR 18th cent)

Capital

Factor of production which includes the tools (money/workers/materials) and technology is used to produce the goods and services we desire

Equity

Fairness in the distribution of output in the nation

laissez-faire approach

Free trade theories - absolute advantage and comparative advantage. Govt hands off

Circular flow of a market economy

Households provide factors of production into resource market, intern resource market returns wages, and we just buy the products/services. It's an exchange of capital

To what extent may economic efficiency conflict with equality?

If only the top onepercent experience is growth sometimes it does not trickle down for the rest of society. Making a poor poor such as a flat tax

Market

In the flow in the market economy, money from the household moves first to the _____.

What threat to sustainability may rise as a result of current patterns of resource allocation?

Increased global climate change as a result of global economic growth, overfishing, deforestation, loss of biodiversity in exchange for expansion of agricultural and industrial output Issue of balance

Flow of market Econ

Input turns to output and income to revenue. Help you to help me to help you

Justification for economic growth

More is always better,

mixed economy

Most economies combined elements of free market with some degree of government intervention

Compare and contrast LLC

Need to be able to c/c LLC on test. -what is most important? -How are they connected? -L+L vs C etc

Data points

On a PPC diagram _____ _____ on the line or curve such as ABC or D represent maximum efficiency as all the factors of production are used

How are alternatives always foregone when an economic choice is made?

Opportunity cost

Arrow

Opportunity cost is represented in a PPC model By an _________

Productivity

Output attributable per unit of input. An increase in _________ of LLC equals increase in output of a nation

The assumption of rational self interest means:

People generally will make the best choices for themselves

What is the difference between positive and normative economics?

Positive describes the world as it is; normative makes statements about how the world should be.

Model

Represents an object or situation from the real world, but doesn't perfectly re-create the characteristics of an EXhot wheels versus real car paper airplane versus plane

Fallacy of command economy

Require state ownership of factors of production therefore there is no incentive to achieve maximum efficiency in use of resources and lacks eff allocation

Constant Opportunity Cost PPC

Resources are easily adaptable between two goods. Straight line PPC shows that the OC doesn't change. One or the other no other factors

Intensified

Scarcity is _________ when we use up more and more of the worlds resources in pursuit of our material desires

Scarcity

Scarcity is represented on the PPC diagram where the curve meets the axes. Shows that there is a limit. And where the curve starts it should finish to show scarcity

Why is scarcity the central problem of Econ?

Scarcity(problem)-> 3 Q (what, how and for who to produce) -> development of various Econ systems and methods of allocation (solution)

PPC demonstrates...

Scarcity~interaction of LLC. Trade-offs and choices, opportunity cost, unemployment, recession, economic growth, economic development, inflation and deflation

Adam Smith

Scottish moral philosopher and a pioneer of political economics. Seen today as the father of Capitalism. Wrote On the Wealth of Nations (1776) One of the key figures of the Scottish Enlightenment. Idea of Liberty/ freedom of choice

Critics of laissez-faire

See it perpetuates poverty, inequality across nations, involuntary unemployment and especially during slumps

sustainability

The ability to keep in existence or maintain. Endure

Scarcity

The basic economic problem that arises because people have unlimited wants but resources are limited.

Economics

The field of Study the concerns itself with the allocation of scarce resources between competing needs and wants of society

freedom of choice

The freedom of owners of property resources to employ or dispose of them as they see fit, of workers to enter any line of work for which they are qualified, and of consumers to spend their incomes in a manner that they think is appropriate.

Opportunity cost

The opportunity lost when making a decision of how to use our scarce resources, whether it's time money or LLC (The next best alternative to the choice you made)

Productivity

The output attributable to each unit of input

Tradeoff

The various opportunities you could choose to pursue in any given situation

Law of increasing opportunity cost

This law is represented on a PPC diagram by a curve

Why do choices have to be made as a result of scarcity?

Three apples for five people

Goal of Econ

To expand the frontiers of human experience, improve efficiency of the use and allocation of the world scarce resources

opportunity cost

What has to be given up in order to undertake any activity or Econ exchange

Human ingenuity

What isn't scarce?

Cost

What must be given up in order to have something else. Choices always have______ because resources are scarce

Big 3 Qs of Econ

What to produce? How to produce? And for whom to produce?

Recession

When the level of output has fallen below the full employment level achieved when producing on it's PPC

who

________ (gov, dictator) answers the three economic questions determines the nature of the economic system

Ceteris Paribus

a Latin phrase that means "all other things held constant" The condition that allows a econ to examine the relationship between just two variables. Because Econ is always real world and takes in view human nature it needs an assumption. However is important to remember CP can be a little unrealistic

command economy

a central authority makes the major decisions about WHAT, HOW, and FOR WHOM to produce Equality/eff, society/individual

PPF (Production Possibilities Frontier)

a curve that shows the maximum quantity of one good that can be produced for each possible quantity of another good produced

social science

a field that studies people and the relationships among them

Firm

an organization that uses resources to produce a product, which it then sells

stake holders

any groups that have a stake - or a personal interest - in the performance and actions of an organization

4 goals of macroeconomics

economic growth low unemployment low inflation sustainable trade deficits

Allocation

the distribution of resources, goods, or services.