EC1101: Principles of Macroeconomics - Lecture 1: Introduction to Macroeconomics

Vocabulary flashcards covering core concepts, economic resources, micro vs. macroeconomics, types of economic systems, and the circular flow model from Lecture 1.

Economics

A social science concerned with making optimal choices under conditions of scarcity.

Scarcity

The condition where society's collective economic wants exceed its productive capacity, requiring choices to be made among limited resources.

Opportunity Cost

The cost associated with every economic decision made, reflecting the principle that "there is no free lunch."

Land

One of the four categories of economic resources; encompasses all natural resources utilized in the production process.

Labor

One of the four categories of economic resources; includes the physical actions and mental activities people contribute to production.

Capital (Investment)

One of the four categories of economic resources; consists of manufactured aids to production.

Entrepreneurial Ability

A special human resource distinct from labor that combines land, labor, and capital to produce goods and services.

Time

Described as the ultimate scarce resource.

The Five Fundamental Questions

Core economic questions: What will be produced? How will it be produced? Who will get it? How will the system accommodate change? How will the system promote progress?

Microeconomics

The study of individual agents in the economy, such as households, workers, companies, or a specific market.

Macroeconomics

The study of the entire economy or a major aggregate of the economy, focusing on broad issues such as growth of production, unemployment, inflation, government deficits and debt, and imports and exports.

Three Pillars of Macroeconomic Health

The three criteria used to assess macroeconomic performance: sustained growth in the standard of living, low unemployment, and low inflation.

Economic System

A set of institutionalized arrangements and coordinating mechanisms that differ based on the degree of decentralized market use versus centralized government control.

Market System

An economic system characterized by decentralized decision-making, dominant private markets, private ownership of resources, self-interested behavior, freedom of choice, private property, and competition.

Traditional System

The oldest economic system in the world (common in parts of Asia, Africa, and South America) where occupations stay in the family, individuals consume what they produce, and little economic progress occurs.

Command Economy

An economic system where economic effort is devoted to goals passed down from a ruler or ruling class, decisions are centralized, the government sets prices and production, and healthcare and education are provided without charge.

Mixed Economy

An economic system combining elements of market, command, and traditional systems, acting as a balancing act between market freedom and government rules.

Underground Economy (Black Market)

Economic transactions conducted without government approval, typically occurring in heavily regulated economies.

Circular Flow Model

A diagram illustrating the continuous flows of resources, goods and services, revenues, costs, income, and expenditures between households and businesses across product and resource markets.

Resource Market

The market in the circular flow model where households sell economic resources (land, labor, capital, entrepreneurial ability) and businesses buy them in exchange for money income (wages, rents, interest, profits).

Product Market

The market in the circular flow model where businesses sell finished goods and services and households buy them using consumption expenditures.