lecture 1 Flashcards
(25 cards)
definition of economics
how individuals choose to use scarce resources that nature/previous generations have provided
what are the 4 factors of production
- capital
- labour
-land - eneterprise
what is production?
process that transforms scarce resources into useful goods and services
what are inputs?
anything provided by nature that can be used for directly or indirectly to satisfy human wants
what are outputs?
goods or services value to households
what are the 3 fundamental concepts of economics?
1 marginalism
2 efficent markets
3 oppertunity costs
what is marginalism?
process of analysing the additional or incremental costs/benefits arising from a choice or decision
what is an efficient market?
a market where profit opportunities are eliminated almost instantaneously
describe what an oppertunity cost is?
the best alternative that we give up when we make a decision
what is microeconomics?
focuses on decision making
asses whether markets function efficiently
looks at the individual firm, industry and household
what is macroeconomics?
looks at the whole
what are the 3 types of economic systems?
-command/planning system
-free market system
-mixed-market system
what is command economics?
made directly by central authority
what are the benefits of command economics?
- resources are allocated to achieve national goals
-unemployment can be avoided
-income can be distributed equally
-rapid growth by investing heavily and sacrificing current consumption
what are the costs of command economics?
- loss of individual liberty
- prices do not guide resource use
- inevitable shortage and surplus
- collecting, analysing and administrating can be costly
how are economic resources allocated?
through price mechanism
- resources and goods in short supply will rise in price
what are the benefits of assessing free-market economies?
- innovation
- high degree of consumer satisfaction
- freedom in production
- resources are used efficiently
- economic decisions do not require a costly system of administration
what are the costs of assessing free-market economies?
-power and wealth are unequally distributed
-tend to reinforce selfishness, greed and materialism
-actions by producers and consumers can damage the environment
-tend to experience cycles with periods of recession or high inflation
what is a mixed market economy?
some economic decisions are made by central authority
what are important considerations in mixed market economies?
liberty - do individual preferances count
equality
economic performance
how well-treated the less well off are
what 4 criteria are important when judging economic outcomes?
1 efficiency
2 equity
3 growth
4 stability
what is efficiency in economics?
an efficient economy is one that producers what people want at the least possible cost
what is equity?
fairness
what is economic growth?
an increase in the total output of an economy
