APPLIED ECONOMICS, CHAPTER 1

Positive Economics

deals with what is - things that are actually happening such as the current inflation rate, the number of employed labor, and the level of the Gross National Product.

Gross Domestic Product

defined as the market value of final products produced within the country.

Scarcity

insufficiency of resources to meet the wants of consumers and insufficiency of resources for producers that hamper enough production of goods and services. Is the reason why people have to practice economics.

Relative Scarcity

is when a good is scarce compared to its demand.

Opportunity Cost

refers to the value of the best foregone alternative.

Normative Economics

refers to what should be - that which embodies the ideal such as the ideal rate of population growth or the most effective tax system.

Land

soil and natural resources that are found in nature and are not man-made. Owners of lands receive a payment known as RENT.

Poverty Line

the estimated minimum level of income needed to secure the necessities of life.

Economic System

the means through which society determines the answers to the basic economic problems mentioned.

Price Theory

the process of setting prices of goods that is also known as ???

Alfred Marshall

well-known economist who described economics as a study of mankind in the ordinary business of life.

Absolute Scarcity

when supply is limited

Economics

As a study, is the social science that involves the use of scarce resources to satisfy unlimited wants.

Traditional Economy

Economy System, decisions are based on the traditions and practices upheld over the years and passed on from generation to generation. Methods are stagnant and therefore not progressive. Traditional societies exist in primitve and backward civilizations.

Command Economy

Economy System, this is the authoritative system wherein decision-making is centralized in the government or a planning committee, Decisions are imposed on the people who do not have a say in what goods are to be produced. This economy holds true in dictatorial, socialist, and communist nations.

Market Economy

Economy System, this is the most democratic form of economic system. Based on the workings of demand and supply, decisions are made on what goods and services to produce. People's preferences are reflected in the prices they are willing to pay in the market and are therefore the basis of the producers' decisions on what goods to produce.

Labor

Physical and human effort exerted in production, It covers manual workers like construction workers, machine operators, and production workers, as well as professionals like nurses, lawyers, and doctors. The term also includes jeepney drivers, farmers, and fishermen, The income received by labors is referred to as WAGE.

Economic resources

factors of production, are the resources used to produce goods and services. These resources are by nature, limited, and therefore, command a payment that becomes the income of the resource owner.

Macroeconomics

is a division of economics that is concerned with the overall performance of the entire economy. It studies the economic system as a whole rather than the individual economic units that make up the economy. It is about the nature of economic growth, the expansion of productive capacity and growth of national income.

Lee Kuan Yew

is an economic icon and an example of how a leader of a previously undeveloped country can lead to overcome its country;s basic economic problems and move toward economic growth. He was the prime minister of Singapore from 1959 to 1990, making him the longest-serving prime minister in history. During his long rule, Singapore became the most prosperous nation in Southeast Asia.

John Neville Keynes

is attributed to be the first to use the phrase "Applied Economics" to designate the application of economic theory to the interpretation and explanation of particular economic phenomena.

Microeconomics

is concerned with the behavior of individual entities such as the consumer, the producer, and the resource owner. It is more concerned on how goods flow from the business firm to the consumer and how resources move from the resource owner to the business firm.

Applied Economics

is the application of economic theory and econometrics in specific settings with the goal of analyzing potential outcomes.

Gross National Product

is the market value of final products, both sold and unsold, produced by the resources of the economy in a given period.

Capital

man-made resources used in the production of goods and services, which include machineries and equipment. The owner of capital earns an income called INTEREST.

Supply and Demand

market value is determined by ???

Relative Scarcity

occurs not because the good is scarce per se and is difficult to obtain but because of the circumstances that surround the availability of the good.