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Intro eco > 1) CH1 Ten Principles on economics > Flashcards

1) CH1 Ten Principles on economics Flashcards

See chapter one of the text book

1
Q

What means begin “rational”?

A

Maximize benefits under a constraint (generally the budget).

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2
Q

What are the 3 elements that give value?

A

Utility (until 19th) Scarcity (until 19th) Labour/added value (since 19th)

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3
Q

What will allow people to live together, according to Adam Smith?

A

The market.

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4
Q

What is the necessary background for the market, according to Adam Smith?

A

The Nation State

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5
Q

What are the 2 elements of “decision making”?

A

Existence of individuals => property Decision rule: rationality, computation => economic calculus

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6
Q

What was the first name of “economics” before the 1930’s?

A

Political economy

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7
Q

What is the constraint in economics?

A

Natural ressources, budget…

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8
Q

What is the cost of something?

A

What you give up to get it.

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9
Q

What does mean “thinking at the margin”?

A

You think at the last unit you get.

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10
Q

For economists, why do you act?

A

Because of incentives: You do because you think you will get a reward.

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11
Q

What is necessary to have a peaceful market?

A

The Nation to put up laws and support costs that cannot be supported by individuals or companies (roads…)

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12
Q

On what does depend the “standard of living”?

A

The country’s production, wealth and how it is distributed, AND other measures of level of life.

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13
Q

What is a “trade-off”?

A

To get one thing, you have to give up another thing.

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14
Q

What are the 4 principles in economics about how people make decisions?

A

1) People face tradeoffs 2) The cost of something : what you give up to get it 3) Rational people think at the margin 4) People respond to incentives

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15
Q

What are the 3 principles in economics about how people interact?

A

1) Trade can make everyone better off 2) Market is usually a good way to organize economic activity. 3) Government can sometimes improve market outcomes.

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16
Q

What are the 3 principles in economics about how the economy as a whole works?

A

1) A country’s standard of living depends on its ability to produce goods and services. 2) Prices rise when the government prints too much money. 3) Society face a short-run tradeoff between inflation and unemployment.

17
Q

What are the 2 uses of money?

A

1) Unit of accompatibility / comparison of goods 2) exchange

18
Q

What is the utility of price?

A

It is a vector of informations.

19
Q

According to classical and neoclassical, what are the 2 prices?

A

1) Nominal price, price a a t-time with inflation 2) Real price without inflation: purchase power of the wage.

20
Q

What is inflation?

A

amount / basket of goods I can buy to survive in my society (price index) Prices are going up.

21
Q

What is disinflation?

A

Prices are getting lower.

22
Q

What is deflation?

A

GDP is going low.

23
Q

What are the 3 reasons for inflation?

A

1) Too much money circulating. => put money in the bank 2) Full employment. => rise production capabilities 3) Shortage of a good

24
Q

What is the law of diminishing returns?

A

The more worker, the less productivity, the less gain, the higher prices

25
Q

Who “invented” the law of diminishing returns?

A

Turgo then Ricardo.

26
Q

What are the 3 components of production?

A

K: Interest Labour (wage) Land (rent) Now, land is in the K (capital)

27
Q

What is happening in production for K and L in a developed society? In a less developed society?

A

K+ L- K- L+

28
Q

Under which judgments do we act, according to A. Smith?

A

The judgment of unknown spectator and an unknown / god.

29
Q

What is efficiency in a society?

A

Society gets the most that it can from its scarce ressources.

30
Q

What is equity in a society?

A

Ressources are distributed fairly among the members.

31
Q

What is the opportunity cost?

A

What you give up to get the item.

32
Q

Why can market make people better off?

A

Because people gain from the ability to trade with each other.

33
Q

What is the “Indivisible hand” (A. Smith)?

A

People follow their best-interest and everyone is better-off. This is a win-win situation.

34
Q

What is a wale fare society?

A

Society where everyone is happy, increasing the wealth of Nation (labour).

35
Q

What is GDP?

A

The sum of added values, trading evaluated.

36
Q

How can be measured the GDP?

A

At a state level or a the individual level.

37
Q

What is productivity?

A

Number of goods produced from each hour of a worker’s time.

38
Q

What does mean that society faces a short-run trade-off between inflation and unemployment?

A

That’s the Philipps Curve:

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