Economics I midterm term Notes

REAL GDP

CATCH UP GROWTH: rapid increases in ________ per capita that can be gained when a poor follower country adopts (the new advanced tech) rather than reinvents cutting edge tech.

PT 1

________: SAVING 🫒 household saving is collected by banks, which are lent the funds to businesses who can invest it in equipment, factories, or other capital goods.

UTILITY

________ (definition): happiness or pleasure obtained /consumed by goods and services.

ENTREPRENEURS

________ TRY TO MAXIMISE PROFITS AND MINIMISE LOSSES 🥐 each characteristic tries to maximise profits, income, and satisfaction the economy goes up if competition is there.

COMPETITIVE MARKET

________ reallocated resources in response to change in consumer taste, technology advances, and changes in availability in resources.

DOLLAR VALUE

________: the "votes "that consumers cast for the making of preferred product 🍯 consumer preferences 🍯 communicates to businesses.

NOMINAL GDP

________: is based upon the proves that were in effect when goods /services (output) was produced.

FAILURES

________: shortcomings that lead to misallocation of resources 🥞 creating too many regulations that are not effective.

PT 2

________: INVESTMENT 🥔 happens when RESOURCES are devoted to INCREASING FUTURE OUTPUT.

A1

________: goods /services that create a PROFIT (added value to a nation)

mutual agreement of transactions

Is REQUIRED to ensure ________ is taken place between buyers- sellers 🍊NO INTIMIDATION OR COERCION IN THE MARKET.

South Korea

FOLLOWER COUNTRIES: countries that adopt advance tech that were previously developed and used by leader countries 🦈 examples of follower countries: ________ and China.

PI

PERSONAL INCOME (________): measured income received, whether earned or unearned.

⛅️labour

________: physical action and menatl activities that people use in production.

Recourse allocation

________: Workers moving from low productivity employment to high productivity employment.

RATIONAL FUNCTIONING

________: forces supply and demand to establish a price where buying and selling choices are coordinated (working together) 🐺 forces to create stability in a market 🐺 figuring out prices is a good tool to eliminating market shortages and surpluses.

LOSS

________: total cost greater than total revenue (cost of making product MINUS money earned)

PROGRESS

________: greater economic output and greater economic output PER PERSON (per capital)

knowledge

The ________ and skill that make people productive.

MACROECONOMICS

________: study of the ENTIRE consumer, firm, or market 🪐macro= big 🪐focuses on: economic growth, business cycle, interest rates, inflation, and the behaviour of major economic aggregates (household, business, gov.

STRONG PROPERTY RIGHTS

________: people wont invest if they believe their investments are not safe from theft or a corrupt government 😽 patents and copyrights 😽 Efficient financial institutions 😽 Literacy and widespread education 😽 Free trade.

A4

________: through communication of the consumer preferences through dollar votes.

⛅️capital

________ (investments): man- made manufactured aid used in production (ie computers)

FIRMS

FREEDOM OF ENTERPRISE: allows ________ to obtain economic resources and to use said resources to produce products of their own choosing + to SELL their products in MARKET OF THEIR CHOICE.

LONG RUN

________: ❣️ all prices are flexible ❣️ firms adjust to unexpected, other than permanent changes in demand.

🌽Market System

________ allows consumers, resource suppliers, and businesses to pursue their self interest.

Principle

4️⃣ Economic ________- A widely accepted generalization about the economic behavior of individuals or institutions.

INDUSTRIAL REVOLUTION

________: creates growth in living standards.

🍿

________ having the ABILITY TO PAY depends on income ________ in market system consumer income AND product prices determine how the output will be distributed.

MICROECONOMICS

________: study of the INDIVIDUAL consumer, firm, or market 🪐micro= small.

MAXIMISE SATISFACTION

RATIONAL SELF INTEREST (definition): individuals /institutions look for ways to INCREASE UTILITY 🌷goal is to ________.

INFLATION

________: Increase in overall level of prices 🍚 EXAMPLE gas prices.

COMPETITION

________: requires TWO OR MORE independently acting buyers + sellers.

Education

________ + training: investment in human capital.

ATTAINABLE

________: all possible combinations of products inside or on the budget line.

SELF INTEREST

________: firms, property owner, workers, and consumer believes is best for itself and seeks to obtain.

Technological advances

________: the discovery of knowledge.

ACTIVE BUT LIMITED GOV

________: may be needed to alleviate market failures.

future economic conditions

EXPECTATIONS: what consumers, firms, and others expects to happen in the ________.

BARTER

________: DIRECT exchanges of one good or service to another good or service; SWAPPING ONE GOOD FOR ANOTHER (wheat in EXCHANGE FOR oranges)

Social science

________ concerned with making OPTIMAL choices under conditions of scarcity.

UNEMPLOYMENT

________: people who are available to work and are ACTIVELY SEEKING WORK but can not find jobs 🍮 the economy failed to FULLY employ (fully use) its LABOUR FORCE 🍮 the economy failed to utilise and use ALL economic resources.

SHORTAGE

________: when the QUANTITY DEMANDED of a product is BELOW the QUANTITY SUPPLIED at a specific price.

PROFIT

________: total revenue greater than total cost (money earned MINUS cost of making product= ________) 🍨 results in expanded production and the movement of resources towards that industry.

Quantity of Capital

________: more and better plant and equipment make workers more productive.

🌥Entrepreneurial ability

________: human visionary ability to undertake risk to successfully create new ideas that make new products, services, and processes for todays FUTURE.

ALLOCATIVE EFFICIENCY

________: to obtain the production of the products most wanted by consumers 🍛 marginal cost and marginal benefit are equal (the sum of consumer surplus and producer surplus is maximised) 🍛 value consumer gains from the price 🍛 maximising utility (consumer); maximising revenue (producer)

NET PRIVATE DOMESTIC INVESTMENT

________: Gross private domestic investment less (MINUS) consumption of fixed capital (depreciation) 🌲 the addition to the nations stock of capital during a year.

SCARCITY (definition)

limits placed on goods and services available for consumption as a result of having little ECONOMIC RESOURCES 🌷 Creates OPPROTUNITY COSTS = needing to use MARGINAL ANALYSIS

OPPROTUNITY COST (definition)

amount of products that have to be sacrificed in order to make another

ECONOMIC PERSPECTIVE

a POV that sees industries and institutions making rational decisions by comparing marginal benefits v marginal costs 🌷 not comparing reasons = not rational decisions 🌷 comparing pros (marginal benefits) v cons (marginal costs)

UTILITY (definition)

happiness or pleasure obtained / consumed by goods and services

PURPOSEFUL BEHAVIOUR (definition)

making decisions with a desired outcome 🌷 decisions that will make people better off, not worse off

RATIONAL SELF INTEREST (definition)

individuals / institutions look for ways to INCREASE UTILITY 🌷goal is to MAXIMISE SATISFACTION

SCIENTIFIC METHOD (definition)

the process of objectively establishing facts through testing and experimentation

1️⃣ Hypothesis

possible explanation of cause and effect

2️⃣ Theory

Favorable Test of Hypothesis

3️⃣ Economic Law

a well tested and widely accepted Theory

4️⃣ Economic Principle

A widely accepted generalization about the economic behavior of individuals or institutions

OTHER THINGS EQUAL ASSUMPTION

assumptions that factors other than those being considered did not change

MICROECONOMICS

study of the INDIVIDUAL consumer, firm, or market 🪐micro = small

POSITIVE ECONOMICS

economic statements that are factual / true

NORMATIVE ECONOMICS

economic statements that are involve judgements

ECONIMISING PROBLEM

limited income and unlimited wants

THE BUDGET LINE (definition)

line that demonstrates different combinations of two products a consumer can buy with a specific budget, given the products prices

ATTAINABLE

all possible combinations of products inside or on the budget line

BUDGET LINE

combinations on or to the left of the line

TRADE OFFS

limited income forces people to choose what they can and cant buy

SOCIETYS ECONOMIC PROBLEM

needing to make choices because economic resources are limited 🌎 referencing to limited production

⛅️labour

physical action and menatl activities that people use in production

⛅️capital (investments)

man-made manufactured aid used in production (ie computers)

🌥Entrepreneurial ability

human visionary ability to undertake risk to successfully create new ideas that make new products, services, and processes for todays FUTURE

FUNCTIONS OF ENTREPRENEURS

☂️ to manage the other factors of production ☂️ take initiative; taking risks ☂️ make strategic business decisions; "setting up the goal" ☂️ innovate; always come up with new ideas

PRODUCTION POSSIBILITIES MODEL

model that shows different combinations of two goods that an economy can produce

PRODUCTION POSSIBILITIES CURVE

curve showing different combinations of two goods / services that can be produced in FULL EMPLOYMENT, FULL PRODUCTION economy where the available supplies of resources and tech are fixed

LAW OF INCREASING OPPROTUNITY COSTS

the production of a god increases, the opprotunity cost of making additional units goes up 🌪 as the nation chooses 🌪 more particular goods produced = its marginal opportunity cost increases 🌪 As the economy produces additional units of PIZZA, more of ROBOTS must be given up

GROWTH

expanding output

🍎 CENTRAL

controlled by GOVERNMENT (think C for China; Communism)

🍎 DECENTRAL

controlled BY THE PEOPLE (think individual; institutional)

LAISSEZ-FAIRE CAPITALISM

"pure capitalism"; type of Econ sys

CENTRAL PLANNING BOARD

group of gov

PRIVATE PROPERTY

right of private people and firms to dispose, manage, own, control, obtain, and leave / hand over (bequeath) land, capital, and other property 🍠 encourages investment, innovation, exchange of assets, maintenance of property, and economic growth-INCLUDING intellectual property through patents, copyrights, and trade marks

PROPERTY RIGHTS

encourages people to make mutually agreement of economic transactions

FREEDOM OF ENTERPRISE

allows FIRMS to obtain economic resources and to use said resources to produce products of their own choosing + to SELL their products in MARKET OF THEIR CHOICE

SELF-INTEREST

firms, property owner, workers, and consumer believes is best for itself and seeks to obtain

COMPETITION

requires TWO OR MORE independently acting buyers + sellers

SPECIALISATION

to concentrate on one or small number of goods & services 🫐 allows economies to take better advantage of their resources and their capabilities 🫐 It enhances efficiency and output by enabling individuals, regions, and nations to produce goods and services for which their resources are best suited

DIVISION OF LABOUR

human specialisation; separation of tasks between a group of people 🍞increases productivity

MONEY

a convenient means of exchanging goods / services WITHOUT engaging in barter 🥥eliminates barter 🥥is socially defined; whatever society accepts as a medium of exchange 🥥influences economy

BARTER

DIRECT exchanges of one good or service to another good or service; SWAPPING ONE GOOD FOR ANOTHER (wheat in EXCHANGE FOR oranges)

MARKET FAILURES

over production of goods that have social costs 🥕 businesses tendency to increase monopoly power in Market System (have selfish interest)

FAILURES

shortcomings that lead to misallocation of resources 🥞 creating too many regulations that are not effective

THE FIVE FUNDAMENTAL QUESTIONS

highlights the economic choices underlying the Production Possibility Curve 🥫 reflects reality of scare of resources in a world of unlimited Wants

PROFIT

total revenue greater than total cost (money earned MINUS cost of making product = profit) 🍨 results in expanded production and the movement of resources towards that industry

LOSS

total cost greater than total revenue (cost of making product MINUS money earned)

CONSUMER SOVEREIGNTY

determined by the consumers of what type and quantities of goods / services that will be made with the limited amount of resources in the economy

DOLLAR VALUE

the "votes" that consumers cast for the making of preferred product 🍯 consumer preferences 🍯 communicates to businesses

PROGRESS

greater economic output and greater economic output PER PERSON (per capital)

ECONOMIC OUTPUT PER PERSON

higher standard of living 🎂 technological advances and Capital Accumulation both contribute to higher standard of living

CAPITAL ACCUMULATION

it provides the resources necessary to produce more capital goods through the increased dollar votes for capital goods 🧃 as people buy, businesses make more profit