Applied Economics – Introductory Lecture

Vocabulary flashcards covering key terms, theorists, branches, tools, and foundational concepts from the introductory lecture on Applied Economics.

Economics

The social science concerned with the wise production, allocation, and use of scarce resources to satisfy unlimited human wants.

Oikos

Greek word meaning “household,” forming part of the root of the term economics.

Nomos

Greek word meaning “management” or “system,” combined with oikos to create the term economics (household management).

Applied Economics

The practical use of economic theories and principles to address real-world problems and decision-making.

Scarcity

The fundamental economic condition of limited resources versus unlimited human wants.

Allocation

The process of distributing scarce resources among competing uses.

Adam Smith

“Father of Modern Economics”; advocate of laissez-faire, competition, and the free market; author of “An Inquiry into the Nature and Causes of the Wealth of Nations.”

Laissez Faire

French for “let alone”; policy that economies function best with minimal government intervention.

Wealth of Nations

1776 book by Adam Smith that laid the foundations of classical economics.

David Ricardo

Classical economist known for the Law of Comparative Advantage and the Law of Diminishing Returns.

Law of Comparative Advantage

Ricardo’s principle that countries benefit by specializing in goods they can produce at lower opportunity cost.

Law of Diminishing Returns

Economic law stating that adding more of one input, while holding others fixed, eventually yields smaller increases in output.

Thomas Robert Malthus

English economist and demographer famous for the Malthusian Theory of population.

Malthusian Theory

Idea that population grows faster than food supply, leading to periodic famine, disease, or war to restore balance.

John Maynard Keynes

Economist who revolutionized macroeconomics; “Father of Modern Theory of Employment.”

Modern Theory of Employment

Keynesian view that aggregate demand determines overall employment and that government can intervene to stabilize the economy.

Karl Marx

Political economist; “Father of Communism”; co-author of “The Communist Manifesto” and author of “Das Kapital.”

Das Kapital

Marx’s major work analyzing capitalism and its inherent contradictions.

Communist Manifesto

1848 pamphlet by Karl Marx and Friedrich Engels advocating proletarian revolution.

Surplus Labor

Marxist concept describing the unpaid labor appropriated by capitalists as profit.

Factors of Production

Basic economic resources: land, labor, capital, and entrepreneurship.

Land (Factor)

All natural resources—soil, water, minerals—earning rent as income.

Labor (Factor)

Human physical and mental effort used in production, rewarded by wages or salaries.

Capital (Factor)

Man-made resources or monetary assets used to produce goods and services—e.g., machinery, buildings, equipment.

Entrepreneur

Organizer who coordinates land, labor, and capital, assumes risk, and seeks profit.

Macroeconomics

Branch of economics that studies aggregates such as national income, employment, and the general price level.

Microeconomics

Branch that analyzes individual consumers, firms, and the determination of prices; often called price theory.

Price Theory

Microeconomic study of how prices are determined by supply and demand.

Gross National Product (GNP)

Total market value of all final goods and services produced by a country’s residents in a given period.

Public Finance

Field studying government taxation, borrowing, spending, and resource allocation for social benefit.

Production (Division)

Creation of goods and services using factors of production; converts inputs into outputs.

Distribution (Division)

Allocation of income or goods among individuals or households in an economy.

Exchange (Division)

Transfer of goods or services between parties, usually mediated by money.

Consumption (Division)

Utilization of goods and services to satisfy wants and provide utility.

Household Economics

Application of economic principles to family decision-making and resource management.

Business Economics

Use of economic analysis within firms to address production, pricing, and profit maximization.

National Economics

Study of a nation’s overall income, expenditure, wealth, and resource management.

International Economics

Analysis of economic interactions among countries, including trade, tourism, and exchange rates.

Logic (Tool of Economics)

Systematic reasoning used to develop and test economic arguments.

Mathematics (Tool of Economics)

Numerical and algebraic methods employed to model and quantify economic relationships.

Statistics (Tool of Economics)

Collection, analysis, and interpretation of numerical data to test economic hypotheses and measure phenomena such as GDP.

Social Science

Category of academic disciplines that study human society; economics qualifies because it examines human behavior regarding resources.

Production Possibilities Frontier (PPF)

Graph showing the maximum feasible combinations of two goods an economy can produce given scarce resources and technology.