ECON 102- Chapter 1 ALL UNITS

Ibn Battuta

14th-century Moroccan traveler who journeyed across Africa

Bengal

Region in the Indian subcontinent noted for abundance of rice and provisions

Jean Baptiste Tavernier

17th-century French diamond merchant who observed similar abundance in Bengal

Living Standards

Level of wealth

Economic Mobility

Ability to improve one’s economic status

Hockey Stick Graph

Visual representation showing long periods of stability followed by rapid change

Greenhouse Gases

Gases that trap heat in the atmosphere; CO₂ is the main one from fossil fuels

CO₂ Emissions

Release of carbon dioxide into the atmosphere

Global Temperature Rise

Increase in Earth’s average temperature due to higher greenhouse gas concentrations

Climate Variability Factors

Natural events (e.g.

Gross Domestic Product (GDP)

Total production of goods and services in a country over a specific period

Gross Domestic Product (GDP) per Capita

GDP divided by population; measures living standards

Purchasing Power Parity (PPP)

Adjusts for price differences across countries to compare living standards

Great Divergence

Sustained economic growth began at different times in countries

Extreme Poverty

When people cannot meet basic needs: food

Rich/Poor Ratio

Ratio of average income of richest 10% to poorest 10% in a country

Decile Groups

Population divided into ten income groups

Global Poverty Trend

Fell from ~76% in 1820 to ~10% in 2018

Production Function

Relationship between number of farmers and grain output; concave due to diminishing returns

Average Product of Labour (APL)

Output per worker; declines as more workers are added (e.g.

Graphical Average Product of Labour (APL)

Represented by the slope of the ray from origin to a point on the production function

Malthusian Trap

Higher productivity leads to larger population

Population Response (Malthus)

If living standards rise → population grows → APL falls → back to subsistence

Technology Effect (Malthusian)

Temporarily raises income

Capitalism

Economic system organized around firms

Defining Institutions of Capitalism

Private property

Role of Firms

Scale production

Structural Transformation

Shift from agriculture-based economies to manufacturing/service-based economies

Arthur Lewis Dual-Sector Model

Labor moves from agriculture to industry

Causation vs Correlation

Causation: one variable directly affects another; correlation: variables move together

Natural Experiment

Observational study using external differences to infer causality (e.g.

Developmental State

Government actively promotes economic development via targeted policies and education

Examples of Developmental States

South Korea

Colonial Impact on India

Decline of textile industry

Economy-Society-Biosphere

Economy is part of society

Resource Flows

Households supply labor & consume goods; firms produce goods; both return waste/pollution to environment