ECON Flashcards by Jane Suminguit

follows historical stages

Linear Stages of Growth

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agriculturally based economy

Traditional Society

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Manufacturing national/international outlook

Pre-conditions for take off

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industrialiation occurs, rapid growth

take off

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takes a long period of time, national economy grows and diversifies, technology increases

drive to maturity

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last “developed” stage. capitalist system. mass production and consumption

age of high mass consumption

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reallocation of labor from agricultural to industrial sector

structural change model

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dominance of developed countries over developing countries lead to dependence and underdevelopment

underdevelopment cos external market

international dependence

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underdevelopment is caused by poor economic policies and resource allocation, and government corruption

developed if reduced government control and promotion of free market

neoclassical theory

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underdevelopment is due to slow transmission of technology to developing countries

knowledge and technology is important in development

new growth theory or endogenous theory

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underdevelopment is due to uncoordinated activities in the market

theory of coordination failure

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development is because workers work together

high wages and investment on human capital are essential

o-ring theory

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the proper allocation and
efficient use of available resources for
the maximum satisfaction of human wants

Fajardo

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the science of choice. It
studies how people choose to use scarce
resources to produce various commodities

Nordhaus

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a scientific study which
deals with how individuals and society

make general choices

Sicat

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branch of knowledge that
deals with production, distribution and
consumption of goods and services

Webster

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Economics studies about wealth
getting and wealth using activities of
man.

Marshall

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economic process

unlimited wants > scarcity > decision-making

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economics from greek word

oikanomia ; oikos - household; nomos - management

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what is economics

study of how people
use their scarce
resources to
satisfy their
unlimited wants.

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Deals with the economic behavior of the
whole economy or its aggregates
(composed of individual units)

aggregates: business, govn, household

macroeconomics

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Gross national product
- Level of employment
- National income
- General level of prices

“EMPLOYMENT
AND INCOME
ANALYSIS”

macro

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Deals with the economic
behavior of individual units
such as: consumers, firms, landowners

micro

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Price of rice
- Number of workers in a certain firm
- Income of Mr. Fu
- Expenditures of PLDT

“PRICE
THEORY”

micro

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are items that you can see, feel and touch that requires scarce resources to produce and satisfy human wants.

goods

Goods that has no opportunity cost

free goods

a product produced by a privately owned business and purchased to increase the utility, or satisfaction, of the buyer.

private goods

it refers to a commodity that is made available to all members of a society. Paid by the government.

public goods

Something not physical that requires scarce resources to produce and satisfy human wants.

services

also called factors of production, inputs, or simply resources,

productive resources

categories of productive resources

natural resources capital resources human resources

are people who work to produce a good or service. Examples are a truck driver, plumber, teacher and nurse.

human resources

are things that occur naturally in the world and can be used to produce a good or service. These resources are gifts of nature and are present without human intervention.

natural resources

are goods produced and used to make other goods and services. Examples are an office building, computer, oven, and wrench.

capital resources

everything comes with a price

there's no such thing as free lunch

These are goods and services that people needs in order to live. Without these things, people cannot survive.

needs

good and services that makes the lives easier and comfortable.

wants

Wants and needs are never satisfied.

branch of Economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individual and firms.

micro

economic problem

scarcity

exists when the economy are not enough to meet the wants or needs of people or the society.

scarcity

When resources needed to satisfy wants and needs are not available

physical scarcity

When resources are available but cannot be used by the person or entity to satisfy their wants or needs.

psychological scarcity

A simplification of economic reality used to make predictions about the real world.

economic theory

A good theory is simple enough to be understood. The more detailed a theory gets, the more confusing it becomes, and the less useful it may seem.

simplify the problem

Assumptions aid us in better understanding economic issues and make sense of the behavior of individuals, groups and institutions in an economy.

simplify the assumptions

major assumptions in econ

Rationality 2. Profit Maximization 3. Perfect Information 4. Ceteris Paribus

Economists assume that individuals act in a logical and predictable manner and pursue goals which will benefit them.

rationality

It means you try to maximize the expected benefit achieved with a given cost or to minimize the expected cost of achieving a given benefit.

profit Maximization

In most markets, it is assumed that consumers and producers have complete and accurate information about products, services, prices, utility, quality, and production methods.

Perfect Information

Latin phrase which means “all things being equal” or “other things held constant”, refers to the assumption which controls the effects of other variables apart from those that are being analyzed in the study.

Ceteris Paribus

fallacies in econ

1. Failure to hold other things constant under ceteris paribus. 2. Post hoc fallacy 3. Fallacy of composition 4. Sweeping Generalization

This is an error in analysis committed when an individual considers other extraneous variables in studying an economic phenomenon. This results in invalid conclusions since they are no longer in keeping with the economic theory or model being considered.

Failure to hold things constant under ceteris paribus

This fallacy relates to the Latin phrase post hoc ergo propter hoc which describes how people make the mistaken notion that since a change happened after a event, then such change was caused by the event that came before it.

Post hoc fallacy

This fallacy occurs when one considers a trait of one part or aspect of something as true and applicable for the whole.

Fallacy of composition

This fallacy refers to a statement that oversimplifies a specific scenario presenting it as a general rule.

Sweeping Generalization

Seeks to understand behavior without making judgements of the outcome. It is measurable and can be proved.

Positive ECONOMICS

Analyzes outcomes of economic behavior, evaluates them as good and bad, and sometimes prescribes a course of action. It cannot be measured or proved.

Normative Statements

Incremental, additional, extra or one more refers to a change in economic variable, or a change in the status quo.

Marginal

maximum amount a consumer is willing to pay for an additional good or service. also the additional satisfaction or utility

marginal benefit

the cost added by producing one additional unit of a product or service.

Marginal Cost

is an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity. a decision-making tool to help them maximize their potential profits.

Marginal Analysis

states that all else equal, as consumption increases, the marginal utility derived from each additional unit declines.

Law of Diminishing Marginal Utility

a state where every resource is allocated optimally so that each person is served in the best possible way.

Economic Efficiency

The basic economic problem is to match limited resources to unlimited wants and needs.

Resources are allocated equally and everyone gets the same share.

Equality

Resources are allocated optimally and we have generated as much satisfaction as possible.

Efficiency

Giving up of one thing in return to another. The alternatives we sacrifice when we make a decision. ------ = Weigh of the Cost & Benefit

Trade-Off

value that is given up Opportunity Cost The alternatives we sacrifice when we make a decision. C r e a t e s The most desirable alternative given up as a result of a decision

Opportunity Cost

optimal method of producing goods at the lowest cost. it’s impossible to produce more of one good without decreasing the quantity of another good that’s produced.

Productive Efficiency

a curve that illustrates the variations in the amounts that can be produced of two products if both depend upon the same finite resource for their manufacture. the point at which a country’s economy is most efficiently producing its various goods and services and, therefore, allocating its resources in the best way possible.

Production Possibility Frontier

a state of the economy in which production represents consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing.

Allocative Efficiency