Principles of Economics

Flashcards for key vocabulary and concepts from an Economics lecture.

Oikonomia

Rules about work within a household or the art of organizing.

Theoretical Economics

Deals with individual and general economic phenomena at a highly abstract level to discover economic laws.

Applied Economics

Applies economic laws, observes society at a specific time, and offers practical solutions for issues.

Economics (Lionel Robbins' definition)

Science that studies human behavior as a relationship between ends and scarce means which have alternative uses.

Microeconomic analysis

Studies individual economic phenomena, relationships, and sizes related to the activity of individuals and companies.

Macroeconomic Analysis

Studies overall economic sizes and deals with problems of the social economy as a whole.

Four Macroeconomic Goals

Stable growth of national production, stable prices, high employment, and balanced payments.

Macroeconomic Instruments

Fiscal, monetary, income/price policies, and international economic policy.

Tinbergen's First Principle

If economic policy needs to achieve goals, there should be as many instruments as goals.

Tinbergen's Second Principle

Instruments must be mutually distinct and independent.

Tinbergen's Third Principle

The most efficient instrument should be selected for each goal.

Positive Economics

Explains scientifically how the economy functions, makes predictions, and describes economic reality as it is.

Normative Economics

Introduces ethical codes and political beliefs into the analysis, providing practical advice for economic policy.

Economic Categories

Most general concepts expressing certain relationships in the process of social production.

Economic Laws

Cover all areas of the economy and represents regularities in the close connection of economic phenomena.

Method of Abstraction

Removal of all irrelevant and secondary elements to reduce the problem to a pure form.

Method of Verification

Unity of theory and practice, where practice proves the accuracy of a theory.

Economic Model

Simplification of reality that captures the core of the events, highlighting important links and cause-effect relationships.

Endogenous variables

Variables originating from the model itself.

Exogenous variables

Variables inputted into the model.

Mercantilism

Economic theory and practice from the 15th to 17th centuries focused on commodity-money exchange and trade.

Early Mercantilism

Aiming to achieve a surplus in the monetary balance, maximizing exports and minimizing imports.

Developed Mercantilism

Advocating a positive trade balance but not opposing imports.

Physiocratic Teaching

A reaction against mercantilism advocating a return to nature and emphasizing agriculture as the only productive activity.

Proprietary Class

Landowners, the church and state officials who appropriate the surplus products of farmers.

Sterile Class

Industrial workers, tradesmen, merchants and members of the free professions as a non-productive class that produces without creating new value.

Adam Smith

Advocated full economic freedom, individual initiative, and the 'laissez-faire' principle.

Adam Smith's Division of Labor

Labor division increases productivity, skill, and wealth.

David Ricardo

Developed the theory of land rent and the theory of comparative costs, supporting free trade.

Thomas Robert Malthus

Proposed theories on population, suggesting that poverty is a consequence of population increase outpacing food production.

Jean-Baptiste Say

Advocated for a subjective theory of value based on utility.

Say's Law of Markets

No product will be manufactured without a corresponding level of demand and in aggregate, supply, is equal to demand.

Theory of Production Cost

Prices depend on production costs like labor, capital, and land.

Labor Theory of Value

A good's price is based on the average amount of work used during manufacturing.

Use Value

A good used to satisfy a human need.

Exchange Value

A good's ability to be exchanged for other goods in the market.

Karl Marx's Labor Power

Workers are paid for their work but create greater value than their labor.

Theory of Marginal Utility

Argues value isn't made and utility is directly proportional to goodness.

William Stanley Jevons

Economic problem of satisfying humans ad nauseum with as little pain as possible.

Gossen's First Law

With each additional used good, the benefits decline to satisfaction.

Gossen's Second Law

To balance the goodness of different assets used, an individual continues until the value all grinds to nil.

Thomas More

Criticized capital and envisioned a society without money.

John Maynard Keynes

Advocated managed capitalism with state economic intervention.

Monetarism

Analyzes the effect of money on investment and consumption.

Supply-Side Economics

Stresses supply and tax cuts to stimulate economics.

Production

The human relationship characterized by creating goods to satisfy purposes.

Economics of Production

People, goals, techniques involved in production.

Social Production

The complex of all economic behavior such as industry.

Necessary Production

Society needs continuous materials and a way to expand that production.

Commercial Production

Products that are traded on a market.

Immediate Social Character

Large, planned products for communities and not markets.

Intermediary Social Character

Small, social products for markets.

Natural Production

The materials exist freely in nature and do not need human modification.

Goods Production

Items modified by labor to satisfy needs.

Economic Goods

Products and services from manufacture.

Effective Natural Production

Production is cheap and made to the lowest needs.

Economic Power

A business' means to balance outputs agains inputs.

Effective Production

Low-cost production.

Production Factors

Materials, work, capital or ideas put into developing products.

Production-side Efficiency

What a business does when it can do only more of another.

Production Problems

Three major decisions facing production in a command structure: "What, how, and for whom to make products?"

Transfer Politics

Privatizing to put a small portion of the whole available.

Form Politics

All types of production, distribution, exchange and sale.

Consumption

Use of items to satisfy needs.

Circulation

Determining a person's share in distribution.

Barter

One product substituted for another.

Key Elements

Objects that both fit human need and can be exchanged.

Factors of Production

Input or resources to maintain business.

Production Nature

Production which is part of a bigger system or society.

Preduzetnistvo

A business where people earn income from the work of others.

Inokosno Preduzece

One person or unit controls and runs a business alone.

Partnersko Preduzece

Company or entity of over two natural people working together.

Akcionarsko Drustvo

A company made of shareholders.

Drzavno Preduzece

Production and service driven company, in essence.

Economic Profit

The actual profit of a company taking into account income and expenses both direct and indirect.

Internal Politics

Privatization that focuses in transferring an entity to workers.

Distribute Politics

Distributing all shares available in an entity.

Holding Commerce

Reaching for markets with an entity based on assets.

Transfer of Politics

The transfer of ownership from public to private hands.

The Requirement

Objects available for satisfaction by purchase.

Capable Payment

Total objects a shopper with means can buy at a price.

Effective Commerce

The amount made at set sales over time.

Latent Commerce

Unmet purchase potential.

System of Needs

People's priorities; real and engineered.

Payment

Level of earnings.

Price

Price/demand balance.

Demand Chart

A chart of purchasing means at certain prices.

Demand Curve

Prices and supply over a set region.

Kurno Marshal Law

Law where falling prices are connected to rising sales, vice-versa.

Hicks Allen's Law

Product A effects good x, as do others.

Substitute Effect

Income in purchasing.

Commerce Effects

Price effects, and demand.

Moore School's Law

Demand for good x effects its counterparts.

Move in Demand Curve

Shift in demand.

Demand Elasticity

The degree to which a demand changes the situation.

Demand Ratio

The number ratio of change between good x sales and cost.

Perfectly Elastic Demand

Total abandonment of a good to cheaper ones.

Elastic Demand

Ratio above 1.

Unique Elasticity

When changes evenly match.

Inelastic Commerce

Price has little effect.