Economics as a social science Flashcards
(14 cards)
What is the economic problem?
Finding a solution to the perceived scarce resources relative to unlimited wants.
EVALUATION:
Resources are ‘scarce’ in economics in the sense that my consuming an egg, for instance, removes your ability to consume the same egg.
‘Unlimited’ means that our wants are always changing, there are many people after the same things, that we want more or better quality products to serve our life better; we cannot consume an infintite or unlimited amount of anything, but the concept is useful for recognising our ever-changing needs and wants.
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Rationality
ECONOMICS TUITION: iowtutor.co.uk
Acting rationally means acting according to what we believe to be in our best interests (say, relating our desires to our budgets).
EXAM QUOTE:
“Agents are able to rank the order of different outcomes from an action in terms of their net benefits to them. They then act so as to maximise the net benefits.”
ECONOMICS TUITION:
Contact Dr Alex Moseley
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ceteris paribus
all other things remain the same
positive versus normative statements
positive statements = statements that can be tested/verified = facts
normative statements = opinion, ‘should do x’
real versus nomimal values
nominal values are current prices, e.g., nice loaf of bread £2.75
real values are prices are adjusted for price inflation, so the bread may cost £0.30 in 1980 prices.
economic index / indices
e.g., inflation index (RPI, CPI), FTSE 100 index -
created using weighted averages to produce one number reflecting a the change in prices in a basket of goods (inflation), or a basket of 100 top companies (FTSE 100 index)
base (of an index)
Usually a 100 (“index number”) and it’s the starting year for the timeline graph
What are the factors of production?
Land
Labour
Capital
Enterprise (entrepreneurs)
What is the difference between circulating capital and fixed capital?
Think of a factor making textiles:
the cottons, the silks, the denims = circulating capital (raw materials that go into making a product)
fixed capital - ‘fixed to the floor’ - machines/computers used to produce the materials
Free goods versus economic goods
Free goods - one person’s consumption of the good does not affect another’s ; unlimited supply; opportunity cost is zero
Economic goods - your consumption of a good affects other people’s ability to consume it; limited supply; opportunity cost is positive …
Define “human capital”
“The value of the productive potential of an individual / group”
based on:
* skills
* experience
* education
* talent
* training
* passion and motivation
Needs versus wants
needs = can’t live without
wants = can live without
These days, these concepts are held as a given, but in the subjectivisit methodology of economics, one person’s needs (to dance, to read, to travel) is another person’s wants.
At times we can give up a ‘necessity’ such as eating a meal in favour of purchasing a book to enjoy.
Renewable resources versus sustainable resources
Renewable = farm produce, fish stocks, timber that is replaced on cutting … constantly replenishing
Sustainable = can meet the needs of today without affecting the needs of the future (not running the resources needed to produce the sustainable goods)
What does elasticity represent (with regards to demand or to supply)?
How responsive are customers or suppliers to a change in price: e.g, if demand is price elastic, customers are more responsive to a price change than if demand is price inelastic.
