core econ

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188 Terms

1

Economics

the study of how people interact with each other and with their natural surroundings in providing their livelihoods and how this changes over time

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2

view of environment/nature

first as undepletable, now as a two-way interactions

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3

causality

a direction from cause to effect when a change in cause produces a change in effect

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4

capitalist revolution

Rapid improvements in technology combined with the emergence of a new economic system.

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5

economic system

a way of organising the economy that is distinctive in its basic institutions

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6

institution

laws and informal rules that regulate social interactions

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7

capital goods

durable and costly non-labour inputs used in production

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8

capitalism

An economic system based on private property, firms and market

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9

how the aspects of capitalism interact

firms use markets to sell their private property

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10

private property

  1. things you can enjoy on your own terms 2. exclude others from 3. can dispose of

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11

markets

connecting people who mutually benefit by exchanging goods

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12

firms

a way of organizing production, where individuals use their capital good s and hire people for labour to produce and make profit

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13

consequences of capitalism

higher living standards because of technology and specialisation

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14

Specialization

the development of skills in a specific kind of work, through competition and cooperation

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15

Technology

the description of a process using a set of materials to produce and output

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16

absolute advantage

when the the inputs needed for someone are less than the inputs needed for someone else

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17

relative advantage

what you need less input for one good compared to the other good compared to the inputs of the other person

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18

economies of scale

doubling the inputs leads to more that doubling of output

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19

developmental state

where the government takes a leading role in promoting economic development through investments, subsidies, education, policies

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20

dynamic economy

Economy bringing sustained growth in living standards

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21

why is there no dynamic economy

no secure private property, markets not competitive, firms owned by privileged people, non-functioning legal system

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22

political system

how governments are selected and how they will make and implement decisions

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23

democracy

political system that ideally gives equal political power to all citizens

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24

inequality

the difference of income and wealth between people

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25

gross domestic product

measure of the market value of all the final goods, total income of everyone in the country

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26

market income

all income received from kano

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27

disposable income

Income available after paying taxes and receiving transfers from the government.

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28

wellbeing

depends on relative and absolute income

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29

measuring inequality

lorenz curve and gini coefficient

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30

gini coefficient of 0

total equality

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31

growth rate

change in income/original income

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32

history's hockey stick

rapid, sustained growth in average living standards since 1700

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33

industrial revolution

wave of technological advances and organisational changes in 18th century

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34

technological progress

change in technology that reduces the needed resources for an output

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35

the missing middle

the gradual disappearance of the middle class as the nation becomes increasingly polarized into rich and poor

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36

reasons for inequality now

missing middle, machines do routine work, high-wage jobs work with information technology

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37

categorical inequality

Inequality between particular social groups (identified, for instance, by a category such as race, nation, caste, gender or religion)

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38

intergenerational transmission of economic differences

inheriting wealth, preference and genes

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39

intergenerational mobility

upward or downward changes in status between parents and children

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40

intergenerational elasticity

When comparing parents and grown offspring, the percentage difference in the second generation's status that is associated with a 1% difference in the adult generation's status.

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41

intergenerational inequality

The extent to which differences in parental generations are passed on to the next generation, as measured by the intergenerational elasticity

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42

endowments

assets of a person that impact their income

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43

solving inequality

education

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44

is inequality fair?

if you think based on work : yes, if you think based on birth environment : no

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45

veil of ignorance

everyone is be ignorant of all his or her particular characteristics when evaluating fairness

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46

inequality aversion

A dislike of outcomes in which some individuals receive more than others.

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47

returns to capital

way bigger than to labour

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48

human capital

the knowledge and skills a worker gains through education and experience that increases productivity or earnings

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49

inequality between people factors

endowments, productivity, reservation options

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50

principal-agent problem

when one party (the principal) hires another (the agent), who in turn can pursue goals that conflict with the principal's because of asymmetric information

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51

Inequality between countries

greater than inequality within countries (that is, the Gini index for the world as a whole is larger than the Gini indexes for individual countries).

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52

Equilibrium

self-perpetuating outcome of an economic model

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53

subsistence level

level of living standards that maintains population amount

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54

ceteris paribus

other things being equal

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55

incentives

Economic reward or punishment, which influences the benefits and costs of alternative courses of action.

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56

relative price

the price of one good in comparison with the price of other goods

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57

reservation options

the next best alternative to a choice

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58

economic rent

benefit from your choice - benefit from next best option

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59

opportunity cost

benefit of the next best option (that you had to forgo for your choice)

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60

economic cost

monetary cost + opportunity costs

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61

feasible frontier/budget constraint

the combinations of goods you can buy with your budget

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62

slope of feasible frontier

marginal rate of transformation / relative price of x-axis (px/py)

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63

indifference curve

different combinations of goods that hold the same value for the consumer

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64

slope of indifference curve

marginal rate of substitution

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65

feasible set

All of the combinations of the things under consideration that a decision-maker could choose given the economic, physical or other constraints that he faces.

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66

constraint choice problem

how we can do the best of ourselves given our preference and constraints and scarcity

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67

preference

the benefit we associate with each outcome

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68

utility

numerical indicator of value

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69

income effect

the change in consumption resulting from a change in real income (more income -> more consumption -> more free time consumption)

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70

substitution effect

leisure is more expensive cause of higher income, so consume less leisure. what happens when you keep the slope of ff fixed but up

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71

production function

expression describing the amount of output that can be produced by an amount of input

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72

marginal product

the increase in output that arises from an additional unit of input

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73

average product

total output / amount of particular input

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74

diminishing return

when marginal product is less than the prior increase

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75

consumption goods

goods that satisfy the customer for a short period

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76

conspicuous consumption

Buying and using products because of the social status

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77

game theory

mathematical tool to analyse strategic situations

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78

strategic interaction

A social interaction in which the participants are aware of the ways that their actions affect others (and the ways that the actions of others affect them).

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79

strategy

actions made taking the effect of others into account

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80

elements of a game

players, strategies, payoffs, information, rules

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81

strategic game

simultaneous, matrix

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82

extensive game

sequential, tree

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83

Nash Equilibrium

set of strategies such that each player maximises their payoff given the other (mutual best reponses)

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84

dominant strategy

best response to all strategies of the other

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85

stability

when no player has an incentive to deviate

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86

Prisoner's Dilemma

A game with a dominant strategy equilibrium, in which playing the dominant strategy yields lower individual and total payoffs compared to other strategies

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87

social dilemma

social optimal outcome is not the one that ontstaat

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88

coordination problem

when there are multiple nash equilibria

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89

free rider

a person who receives the benefit of a good but avoids paying for it

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90

altruism

The willingness to bear a cost in order to benefit somebody else.

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91

social preference

preference that place value on benefiting others

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92

zero sum game

a situation in which one person's gain is another's loss, every strategy combinations payoff is zero

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93

public good

a shared good or service for which it would be impractical to make consumers pay individually and to exclude nonpayers

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94

matching market

matches members of 2 distinct groups who each benefit from being matched with the right member of the other group

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95

3 ways of gaining coordination in markets

price coordination, explicit matching, designed markets

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96

short way for designed markets

made by intelligent engineer to create : 1. thick markets 2. fast markets 3. safe markets

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97

long way for designed markets

coalitional game theory for stable matchng

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98

stable matching

a perfect matching with no unstable pairs (NE)

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99

tipping point/ unstable point

a small difference from the point will lead to further distance because of the market mechanism

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100

way o form new markets

public policy and low prices for one group

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