topic 1 - (outline of econ, PPF, opportunity cost) Flashcards
scarcity is…
the excess of human wants over what can actually be produced
working definition of economics is…
the study of how society (or individual) manager its scarce resources
what is PPF
draw what a standerd PPF looks like
production possibility frontier is a curve showing all possible combinations of goods that can be produced within a specific time period when all resources are fully and efficiently deployed.
looks like a quarter of a circle on normal graph slide 7
opportunity cost is…
the cost of any action measured in terms of the best alternative forgone action
explain comparative advantage in terms of nations A and B and goods X and Y
if there are 2 nations A and B and goods X and Y. A would have a comparative advantage in producing good X if, and only if the opportunity cost of producing X in terms of Y is lower for A then B.
(if it is more worth will for A to produce a good then it is for B)
when would a nation A have a absolute advantage in producing good X
if the nation A is more efficient in producing good X then nation B
overall production _______ and countries benefit form _____ if each country ___________ in the production of the good they have a __________ _______ in producing. This is a fundamental of the ________ _____ __ _____.
increases, trade, specialise, comparative advantage, Ricardian model of trade
(might need to put down more information form slide 23)
a free market (capitalist) economy is were…
property rights are voluntarily exchanged at a price arranged completely by the mutual consent of sellers and buyers.
a command (or planned) economy is were…
generally in practise for economies this means the ________ ________ will establish a ___________ _____, develop a plan to achieve it and set up guidelines for the __________ and ___ of the goods services produced.
all relevant economic decisions are made centrally.
central planner, production target, distribution, use
in reality most markets are ______ economies where:
the government and private sector ______ _____ _______ _______.
the government influences decisions through…
incentives are modified through modification of the _____ ______
it also regulates…
mixed
jointly solve economic problems
taxation, substitutes and prevision of free services e.g military and police.
price system
the extent to witch individuals may pursue their own self interests
(don’t know how this is done)
(flash card may have unneeded information)
Positive economics studies…
whiles
Normative economics offers…
object or scientific (testable) explanations of how the economy works
recommendations based on (non-testable) value judgements
e.g facts Vs opinions
microeconomics is the study of…
macroeconomics is the study of…
in macoeconomics we ________ the ________ _______ _____ of the analysis in order to _______ _ __________ ________ of the complete interaction of the economy.
an individual unit e.g individual consumer, household or industry.
interactions in the economy as a whole.
simplify, individual building blocks, retain a manageable analysis
what makes a good model?
A good model explains important aspect of the world, with the least amount of (correct) assumptions necessary.
(least assumption possible while keeping a accurate model is best)
