Chapter 1,2 Flashcards
(64 cards)
What is the problem of economy and how do we solve it
Limited resources, but our wants are unlimited
To solve than: we have allocation, production, redistribution and trade
Trade is a solution for
Scarcity
Economics is ___ science, but we use ___ approach
Social science ( because it is concerned how to improve society)
Bit it uses scientific method to approach it ( mathematics, models, data)
Slope of PPF is
opportunity cost
Challenges for today’s society
Unemployment for young people
Government balance sheets are in disarray
Inequality is on the rise
Overpopulation
Climate change
Political instability
Globalization
Good news for economy
- Literacy is rising
- Child mortality has plummeted
- Family size - smaller
- Prosperity is on the rise in much of Asia
- Life expectancy is rising
- Deaths through wars are decline since WW2
Difference between microeconomics and macroeconomics
Macro- the economy as a system ->national output, employment, prices, government, policies and inflation
Microeconomics- the study of individual behavior in the context of scarcity
What is a mixed economy
Goods and services are supplied both by private suppliers and government
What is the role of the government in economy
Regulating, redistributing and enforcing contracts. Without this legal structure the private sector should decline into a state of Hobbesian anarchy
-Monetary policies ( prodcuing money, interest rate)
Taxation, expenditure policies-fiscal policy
What is a model
Formalization of theory that facilitates scientific enquiry
What is a theory
A logocal view of how things work, and is frequently formulated on the basis of observation
What is an opportunity cost
When you take decision, you need to sacrifice something-> cost
Different opportunity costs result in __
Specialization
Assumed initial consumption
If half of the time was spent on production of each product
Specialization is useful if ___
Both parties win from the trade
Trade is not ___
A zero-sum game->so every party wins
How many canadian export is going to US
80%
An agreement between Canada, Us and Mexico called
North America Free Trade Agreement(NAFTA)
The trade between Canada and EU
CETA- Comprehensive Economic and Trade agreement-> to eliminate virtually all tariffs between Canada and the Eu
What is TPP
Trans Pacific Partnership
12 countries around Pacific, including Canada, US signed out
What is economy -wide PPF
The set of products combinations that can be produced in the economy when all available productive resources are in use
How to create a graph for economy wide PPF
PPF is a concave of the individual capabilities
The most efficient way of increasing F production
at the point a is to use the individual whose opportunity cost is lower. Zoe can produce one unit
of F by sacrificing just 0.5 units of V, whereas Amanda must sacrifice 1.5 units of V to produce
1 unit of F. Hence, at this stage Amanda should stick to V and Zoe should devote some time to
fish. In fact as long as we want to produce more fish Zoe should be the one to do it, until she has
exhausted her time resource.
What is productivity of the economy
Output per worker
Productivity of labour depends on
The skill, knowledge and experience of the labour force
The capital stock: buildings, machinery, equipment, and software the labour has to work with
The current technology embodied in the labour force and the capital stock
