intro to economics Flashcards
(25 cards)
goods
Physical product that you can touch
services
intangible things
what is the purpose of any economic activity
To increase people’s economic welfare by creating outputs that satisfy their various needs and wants
what leads to the three fundamental questions
There’s and endless array of things that can be produced and consumed but limited resources
what are the three fundamental questions
-what to produce
-how to produce it
-who to produce it for
producers:
Firms or people that make goods or provide services
consumers:
People or firms who buy the goods and services
government:
They set rules that participants in the economy must follow but also produce and consumer goods and services
what does it mean to be rational
In a market economy all economic agents are assumed to be rational meaning they’ll make decisions that suit them best depending on economic incentives eg making profit
what do economists answer to the three fundamental questions
What to produce =goods that firms can make profits from
How to produce it=most efficient way to maximise profits
Who for=for consumers who are willing to pay for the goods
why is economics considered a social science
Because it looks at the behaviour of humans as either individuals or organisations
what assumption to economists use and what does it solve
Ceteris Paribus which is the assumption used to get around the problem of the existence of multiple variables in an economy
when do economists use ceteris paribus and what does it allow them to do
-use when looking at the reltionship between two factors and they assume that only these 2 factors change and all others that would have an effect on any other variable remains the same
-enables them to develop theories and models and make predictions
what are decisions by individuals,firms and businesses based on
-opinions and judgments
-normative statements (people’s opinions)
-moral views and value judgments
-political judgments
-short term positive consequences of a decision regardless of the long term consequence
positive statements and their importance:
Objective statements that can be tested by referring to evidence and they’re important because they can be tested to see wether economic ideas are correct
normative statements and their importance:
They are subjective statements which contain a value judgment(basically opninons)
they’re important because they influence decision making and gov policy
what is the economic problem
satisfying unlimited needs and wants with finite/limited resources
how can the available scarce resources be used to satisfy people’s infinite needs and wants as effectively as possible
what are the 4 fops
CELL:capital,enterprise,land and labour
capital
equipment used in producing goods and services
enterprise
-willingness to take a risk to make a profit
-refers to the people (entrepreneurs) who take risks and create new things from the threee other factors of prod
land
-inc all the natural resources on it (both renewable and non renewable) as well as extracted materials
labour
-work done by people who contribute to the prod process
monopolies
Successful businesses can become the only supplies of a product which causes market dominance that could be abused
pros of monopolies
1)eos mean lower average cost from the inc scale of the company meaning higher profit
2)reward of getting a patent may encourage investment
3)firms w monopolies are more effecient,succesful and innovative
4)gov can regulate them to get the best of both worlds ie eos and fair prices
5)reinvestment in products
