ECODEV MIDTERM FLASHCARDS

Social Science

in its broadest sense, the study of society and the manner in which people behave and influence the world around us. It is the study of people: as individuals, communities, and societies; their behaviours and interactions with each other and with their built, technological, and natural environments.

Economics

is a social science concerned with the production, distribution, and consumption of goods and services. It attempts to explain how wealth is created and distributed in communities

Xenophon

a Greek philosopher whom Oikonomikos was derived from, who was influenced by Pythagoras.

Oikonomikos

described how to efficiently organize and run an agricultural estate

Oikos

Greek for “house” or “household” but in ancient Greece, it was also used for “estate” or a “productive unit”

Nemein

Greek for “to manage”

Microeconomics

focuses on how individual consumers and producers make their decisions. This includes a single person, a household, a business, or a governmental organization.

Macroeconomics

studies the overall economy. This can include a distinct geographical region, a country, a continent, or even the whole world.

Ceteris Paribus

Latin for “holding other things constant.” The assumption that all other things remain equal.

Economic Methodology

the study of how economics function, how it could function, and how it should function, and of the various presuppositions and conditions of all these.

Adam Smith

Father of Modern Economics

An Inquiry into the Nature and Causes of the Wealth of the Nations (1776)

This book is the earliest known compilation of economic concepts, and is regarded as the “Bible of Capitalism”

Scarcity

is one of the fundamental issues in economics. The issue of this means that we have to decide how and what to produce from limited resources.

Trade-off

the concept wherein choosing more of one thing can only be achieved by giving up something else in exchange.

Opportunity Cost

the loss of the next best option, the benefit that the alternative in a trade-off would have provided

Paul Samuelson

according to him, in order to help solve the problem of scarcity, all societies must answer three basic questions: What to produce? How to produce? and For whom to produce?

Production Possibility Frontier (PPF)

represents the point at which a country’s economy is most efficiently producing its goods and services.

The Law of Demand

is a microeconomic law that states, ceteris paribus, as the price of a good or service increases, consumer demand for the good or service will decrease, vice versa

Demand

the amount of some product that a consumer is willing and able to purchase.

The Law of Diminishing Marginal Utility

Focuses on the Demand side, Ceteris Paribus, as a consumption of one thing increases, marginal utility (additional satisfaction) derived from each additional unit declines.

The Law of Supply

is the microeconomic law that states that, ceteris paribus, as the price of a good or service increases, the quantity of goods or service that suppliers offer will increase.

Supply

refers to the willingness of a seller to sell the specified amount of product within a particular price and time

The Law of Diminishing Marginal Returns

Focuses on the Supply side. Ceteris Paribus, if one factor of production is increased while other factors are held constant, the marginal output per unit will eventually diminish

Equilibrium

a single price which brings supply and demand into balance

Shortage

this is what occurs when the price is below the equilibrium price

Surplus

this is what occurs when the price exceeds the equilibrium price

Price Ceiling and Price Floor

these are the legally mandated maximum and minimum price

Price Ceiling

government-imposed maximum price that sellers are allowed to charge for a good or service. It is intended to help consumers (buyers) by making essential goods and services more affordable, such as rent, medicine, or basic food items.

Price Floor

government-imposed minimum price that buyers must pay for a good or service. It is intended to help producers (sellers) by ensuring they receive fair or higher income for their goods or labor

Market Saturation

is a situation that arises when the volume of a product or service in a marketplace has been maximized.

Traditional Economic System

an economic system that focuses exclusively on goods and services that are directly related to its beliefs, customs, and traditions.

Command Economic System

an economic system that is characterized by a dominant centralized power (usually the government) that controls a large part of all economic activity. It is sometimes referred to as a planned economic system.

Laissez-faire Economic System

French for “allow them to do.” This approach was proposed by Adam Smith in The Wealth of the Nations, with the introduction of the Invisible Hand concept. This economic system relies on free markets and does not allow any kind of government involvement in the economy.

Mixed Economic System

refers to any kind of mixture of a market and a command economic system. It is also referred to as a dual economy. Neither the private nor the government sector alone can maintain the economy, both play a crucial part in the success of the system.

Mercantilism

a school of thought from the 16th to the 18th centuries that was based on the principle that the world’s wealth was static, and consequently, governments had to regulate trade. This was a form of economic nationalism that sought to increase the prosperity and power of a nation through restrictive trade practices. This preferred a Trade Surplus more than a Trade Deficit.

Classical Economics

Founded in the late 18th and early 19th centuries, this school of thought emphasizes the idea of free markets and the “invisible hand” guiding economic activity. Self-regulating democracies and capitalistic market developments form the basis for this. It forms that supply creates its own demand and that wages and prices adjust naturally, and that government intervention should be minimal

Marxist Economics

this school of thought focuses on the critique of capitalism, it emphasizes the role of class struggle (bourgeoisie vs the proletariat) and the exploitation of labor in capitalist societies. This predicts that capitalism will eventually be overthrown and replaced by socialism and ultimately communism

Neoclassical Economics

a school of thought that focuses on how individuals and firms make rational decisions to maximize utility and profit, respectively, under conditions of scarcity. Emerging in the late 19th century, it builds on classical economics but shifts the emphasis toward marginal analysis. This uses mathematical models to explain and predict economic behavior. This approach continues to dominate mainstream economic theory everyday.

Institutional Economics

this school of thought emphasizes the role of social, legal, and political institutions in shaping economic behavior and outcomes. This views the economy as deeply embedded in society. It argues that habits, norms, laws, and historical context play a crucial role in influencing how people make economic decisions. Institutions are not seen as constraints but as evolving structures that shape incentives, behavior, and development over time.

Austrian Economics

Also known as the Hayekian Economics. It is a heterodox economic tradition that emphasizes individual action, entrepreneurship, subjective value, and the importance of market processes over mathematical models. Founded by Carl Menger in the late 19th century, the school argues that economic phenomena arise from the purposeful choices of individuals, not abstract aggregates. It highlights the limitations of mathematical modeling in economics, favoring qualitative analysis.

Keynesian Economics

was founded mainly based on the works of John Maynard Keynes during the Great Depression and was the beginning of macroeconomics as a separate area of study from microeconomics. It challenges the classical belief that markets are always self-correcting. Keynesians believe that during recessions, the government should actively intervene through fiscal policy.

Monetarism

Developed by Milton Friedman in the mid-20th century as a response to Keynesian economics, it emphasizes the role of money supply in determining economic activity and inflation. It argues that controlling the money supply is crucial for managing economic stability. They believe that markets are generally efficient and that government intervention especially through fiscal policy, is often destabilizing.

Behavioral Economics

is a school of thought that blends psychology and economics to better understand how people actually make decisions, often in ways that deviate from the rational, self-interested behavior assumed in traditional economics. It shows that individuals are influenced by biases, emotions, social pressures, and heuristics.

Loss Aversion

we fear losses more than we value gains

Present Bias

we prefer immediate rewards

Bounded Rationality

our thinking has limits; “the more we know, the more we realize how little we actually know”

Gross National Product

is an estimated value of the total worth of production and services, by the citizens of a country, on its land or foreign land.

Gross Domestic Product

an estimated value of the total worth of a country’s production and services, within its boundary, by its nationals and foreigners calculated usually over the course of one year. This enables policymakers and central banks to judge whether the economy is contracting or expanding. This is also the primary measure for identifying and measuring phases of a country’s business cycle, such as recession and expansion.

Nominal GDP

When the GDP is estimated at current prices. This is the value of all the final goods and services that an economy produces during a given year. It is calculated by using the prices that are current in the year in which the output is produced.

Expenditure Method

The method used when computing for the Nominal GDP

Real GDP

is when the estimation is made at constant prices. This is the total value of all the final goods and services that an economy produces during a given year, accounting for inflation

GDP Deflator

is a price index that measures the average level of prices of all new, domestically produced, final goods and services in an economy. This helps economists and policymakers track prices over time and understand the impact of inflation or deflation on the economy

Real GDP per Capita

is a measurement of the total economic output of a country divided by the number of people and adjusted for inflation. Its used to compare the standard of living between living countries and over times

Gross National Income

is a measurement of a country’s income. It includes all the income earned by a country’s residents and businesses, including those that are earned abroad

GNI per Capita

a measurement of income divided by the number of people in the country

Consumer Price Index

a measure that examines the weighted average of prices of a basket of consumer goods and services. Changes in this are used to asses price changes associated with the cost of living; this is one of the most used statistics for identifying periods of inflation or deflation

Basket of Goods

refers to a relatively fixed set of consumer products and services values on annual basis and used to track inflation in a specific market or country

Inflation

is defined as the sustained increase in the general level of prices for goods and services in a country and is measured as an annual percentage change. As this rises, every peso you own buys a smaller percentage of a good or service.

Demand-Pull Inflation

is caused by the overall increase in demand for goods and services, which drives up their prices. This theory can be summarized as “too much money chasing too few goods.” If demand is growing faster than supply, prices will increase. This usually occurs in rapidly growing economies

Cost-Push Inflation

caused when companies’ costs of production go up. When this happens, they need to increase prices to maintain their profit margins. Increased costs can include things such as wages, taxes, or increased costs of natural resources or imports.

Monetary Inflation

is caused by an oversupply of money in the economy. Just like any other commodity, the prices of things are determined by their supply and demand. If there is too much supply, the price of that thing goes down.

Disinflation

is a condition where inflation is still positive, but the rate of inflation is decreasing

Stagflation

is a condition of slow economic growth and relatively high unemployment – economic stagnation —accompanied by rising prices, or inflation, and a decline in Gross Domestic Product (GDP).

Hyperinflation

unusually rapid inflation, typically more than 50% in a single month. In extreme cases, this inflation gone awry can lead to the breakdown of a nation's monetary system or even its economy.

Zimbabwe

in 2007-2009, this country experienced one of the worst cases of hyperinflation in recorded history, with inflation estimated at 87.9 sextillion percent in November 2008.

Reserve Bank of Zimbabwe

they excessively printed money to finance military spending and controversial land reform programs which resulted in the hyperinflation of Zimbabwe

Hyperinflation in Venezuela

Since 2016, this country has faced an ongoing period of hyperinflation, reaching a peak of over 10,000,000% in 2019. This crisis was driven by a combination of factors, starting with a sharp decline in oil production and global oil prices, which severely impacted the country’s oil-dependent economy. In response to growing fiscal deficits, the government resorted to excessive money printing to cover spending.

Deflation

is when the general level of prices is falling. This typically occurs during times of recession or economic crisis and can lead to deep economic crises, including depression, which then causes a deflationary spiral

Deflationary Spiral

when prices are going down, why would you spend your money today, when each dollar will be more valuable tomorrow? And why spend tomorrow when each dollar can buy more the day after?

Unemployment

is a phenomenon that occurs when a person who is actively searching for employment is unable to find work. This is often used as a measure of the health of the economy.

Unemployment Rates

is the most frequently used measure of unemployment

Labor Force

is the number of people in a country who are employed plus unemployed

Frictional Unemployment

Arises when a person is in-between jobs. After a person leaves a company, it naturally takes time to find another job, making this type of unemployment short-lived. It is also the least problematic from an economic standpoint.

Cyclical Unemployment

comes around due to the business cycle itself. This rises during recessionary periods and declines during periods of economic growth. This tends to create more unemployment.

Structural Unemployment

Comes about through technological advances, or when people lose their jobs because their skills are outdated

Seasonal Unemployment

Results from regular changes in the season (e.g. Ski Instructors, resort workers)

Classical Unemployment

also known as Real Wage Unemployment, this happens when wages are higher than the laws of supply and demand would normally dictate

Underemployment

workers who have jobs, but they aren’t working to their full capacity or skill level. It reflects a gap between the type or amount of work people are doing and what they are capable of or willing to do.

Development

a process that creates growth, progress, positive change, or the addition of physical, economic, environmental, social, and demographic components. It is visible and useful, not necessarily immediately, and includes an aspect of quality change and the creation of conditions for a continuation of that change

Development as a long-term process of structural societal transformation

signifies a long-term fundamental shift in a society’s structure and organization (ex. schooling)

Development as a short-to-medium term outcome of desirable targets

Focusing on these outcomes allows for more tangible and actionable development strategies

Development as a dominant discourse of western modality

this discourse, rooted in the idea of a linear path to modernity, suggests that all nations should follow a western model of development, emphasizing industrialization, capitalism, and adoption of western technologies

Economic Development

generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area. It is a process of stepping up the rate of capital formation that is needed for rapid capital development

Traditional Approach

an economic factor that has been developed from the perspective of what was necessary to attract and keep businesses in local communities

Growing Economy Approach

an economic factor that defines development as including improvements in material welfare, especially for persons with lowest income, and eradication of mass poverty with the availability of resources and their distribution. In this approach, human resources are at the core of economic development.

Non-economic Factors

are those economic factors present in society that have no direct effect o the economy of a country. These relate to sociocultural and political changes in society, which either lead to economic growth or serve as a hindrance to growth (e.g. religion culture, social activities, uprisings)

Economic Underdevelopment

this takes place when resources are not used to their full socioeconomic capabilities or potential. This it results in local or regional development at a slower pace than it should be

Underdevelopment

is caused by the coexistence of unutilized and underutilized manpower and exploited and unknown resources

Rational Choice Theory

a theory that states that individuals use rational calculations to make rational choices and achieve outcomes that are aligned with their own personal objectives. These results are also associated with maximizing an individual’s self-interest. Adam Smith is usually credited for this theory

Evolutionary Economics

is a theory proposing that economic processes evolve and that economic behavior is determined both by individuals and society as a whole. This term was first coined by Thorstein Veblen, an American economist and sociologist. It shuns the rational choice theory of traditional economics, arguing that psychological factors are key drivers of the economy.

Conspicuous Consumption

is the purchase of goods or services for the specific purpose of displaying one’s wealth (people are driven by validation)

Creative Destruction

a model by Austrian economist Joseph Schumpeter that described the essential nature of capitalism as a relentless drive toward progress, expanding on Veblen’s early observations

Folk-Urban Continuum

We categorize settlements along a continuum, as there are many settlements that show both rural and urban features, sitting between the extremes of a lone house in the countryside and an expanding metropolis. This idea was promulgated by Robert Redfield. In this, folk society comes in contact with urban civilization and inherits certain characteristics.

Walt Whitman Rostow’s Linear Growth Theory (1960s)

he argued that economies must go through a number of development stages towards greater economic growth. He argued that these stages followed a logical sequence; each stage could only be reached through the completion of the previous stage. (Traditional Society-Pre-takoff stage-Takeoff-Drive to Maturity-Stage of Mass Consumption)

Traditional Society

dominated by agriculture and barter exchange, and where science and technology are not understood or exploited

Pre-take-off Stage

with the development of education and an understanding of science, the application of science to technology and transport, and the emergence of entrepreneurs and a simple banking system and hence rising savings.

Take-off

with positive growth rates in particular sectors and where organized systems of production and reward replace traditional methods and norms

Drive to maturity

with an ongoing movement towards a diverse economy, with growth in many sectors

Stage of mass consumption

where citizens enjoy high and rising consumption per head, and where rewards are spread more evenly

Harrod & Domar’s Linear Growth Theory

The importance of savings and investment is central to this. This includes two elements: capital-output ratio and savings