Week 1: Markets and Efficiency Flashcards
(20 cards)
What is the main focus of the POLS0081 course?
Understanding economic thinking, analyzing policy and inequality, expanding beyond Neoclassical Economics.
What is the format of the course exam?
Two-hour in-person exam, 3 open-ended questions + 3 with graphs, held in Term 3.
What is the definition of economics in this course?
It’s about provisioning – how societies meet needs, produce/exchange goods, and address inequality.
What does ‘provisioning’ mean in economics?
The system through which societies provide for needs and organize production and distribution.
What role does the environment play in economics?
Economic activity affects and depends on environmental factors like land, water, and emissions.
What defines a market in economic terms?
A structure for exchange between buyers and sellers, governed by supply, demand, and competition.
What is the central debate about the state’s role in economics?
Whether the economy should be left to the market or actively managed by the state.
What are factor endowments in trade theory?
The resources a country has (land, labor, capital) that affect trade outcomes and inequality.
What does the Stolper-Samuelson theorem suggest?
Trade can cause class conflict by affecting incomes differently across social groups.
Who challenged the ‘Tragedy of the Commons’ view, and how?
Elinor Ostrom, showing that communities can manage shared resources effectively.
Define Pareto Efficiency.
A situation where no one can be made better off without making someone else worse off.
What are the assumptions of a perfectly competitive market?
Many buyers/sellers, identical products, free entry/exit, perfect info, price-taking behavior.
What does the First Fundamental Theorem of Welfare Economics state?
Perfectly competitive markets lead to Pareto efficient outcomes.
What is a limitation of the First Welfare Theorem?
It ignores distribution—efficiency may not mean fairness.
What does the Second Fundamental Theorem of Welfare Economics state?
Any Pareto efficient outcome can be reached through redistribution and free markets.
Why are taxes considered distortionary in economic theory?
They can change behavior and reduce market efficiency.
Name three key concepts covered in Lecture 1.
Markets, Efficiency (Pareto), and Equity.
What are the six schools of economic thought listed in the lecture?
Classical, Marxist, Neoclassical, Institutional, Keynesian, Monetarist.
What is social capital and why is it important in economics?
It refers to the value of cooperation and networks in managing resources and outcomes.
What does the course aim to prepare students for?
Future modules like International Political Economy, Big Business regulation, East Asian political economy.
