Introduction to Economics Flashcards

Vocabulary terms and definitions covering the fundamental principles of economics, including scarcity, production factors, Maslow's hierarchy, and the Production Possibilities Curve.

Economics

A social science that studies the principles governing the effective utilization of limited resources with numerous alternative applications to satisfy multiple needs.

Microeconomics

The study of individual entities in the economy, such as households and businesses, their choices, and their interaction in specific markets and industries.

Macroeconomics

The study of the economy as a whole, focusing on the total level of economic activity such as Gross Domestic Product (GDP), inflation, unemployment, and economic growth.

Scarcity

The condition where economic resources are limited in supply while needs and wants are unlimited, meaning there are not enough goods and services to satisfy everyone.

Needs

Basic things required for survival, such as food, water, clothes, shelter, and jobs.

Wants

Things that human beings desire but are not necessarily required for survival, and they are unlimited.

Natural Resources (Land)

Inputs obtained from nature such as raw materials, land, water, coal, and oil; the payment for these resources is rent.

Labor

The human resource referring to the physical and intellectual effort of people engaged in production; the payment for this is wage.

Capital

Man-made resources used as inputs in production, such as buildings, tools, and machines; the payment for this is interest.

Entrepreneurship

The act of organizing the other factors of production and assuming the risk of a business venture; the reward is profit.

Physiological Needs

Maslow's lowest level of basic needs, including food, clothes, and a place to live.

Security Needs

Needs for physical and financial security, such as burglar alarms, life insurance, pension funds, or property ownership.

Social Needs

The need for love and contact with other people.

Status Needs

The need to be recognised and respected by others.

Self-actualisation Needs

The desire for personal development and self-advancement.

Opportunity Cost

The value of the next best alternative (the best foregone opportunity) that must be sacrificed when a choice is made.

Production Possibilities Curve (PPC)

A graphical illustration showing the maximum combinations of two goods that an economy can produce, given its available resources and technology.

Law of Increasing Opportunity Costs

The principle that to get more of something, one must give up ever-increasing quantities of something else, causing the PPC to be bowed outward.

Point H (Inside the PPC)

An attainable point indicating that the economy is not using all resources fully and efficiently; it is producing less than it is capable of.

Point G (Outside the PPC)

An unattainable point with the resources and technology currently available.

Economic Growth

An increase in the quantity of goods and services that a country produces over time, represented by an outward shift (to the right) of the PPC.

Causes of Economic Growth

Technological change, labor force growth due to population or immigration, and an increase in the quantity of capital goods.

Economic Decline

A reduction in the production capacity of a country that shifts the PPC inwards to the left, often caused by war, natural disasters, or economic sanctions.

Capital Goods

Man-made goods used in the production of other goods and services.

Consumer Goods

Goods produced for final consumption by individuals or households.

Economy

The institutional structure through which individuals in a society coordinate their diverse wants or needs.

Assumptions of the PPC

The conditions that all resources are fixed, all resources are fully employed, and technology remains unchanged.