Business Economics - Lecture 1 (Botswana Accountancy College)

Vocabulary flashcards covering key concepts from Lecture 1: economics basics, PPC, growth, efficiency, and economic reasoning.

Economics

The study of allocating scarce resources to meet unlimited human wants, involving choices among alternative uses.

Microeconomics

The branch that studies individual entities, firms and households and their decision-making.

Macroeconomics

The branch that studies the economy as a whole and its basic subdivisions.

Business Economics

A field of applied economics using theory and quantitative methods to study businesses and the economic environment influencing them.

Price mechanism

Prices signal and coordinate what to produce, how it is produced, and who buys, guiding resource allocation.

Economizing Problem

The scarcity-induced need to make rational choices to maximize utility.

Scarcity

The condition of having limited resources relative to unlimited wants.

Three options for dealing with scarcity

Economic Growth; Better use of available resources; Reducing expectations.

Wants

Desires that are unlimited and change over time and space; not all can be satisfied.

Opportunity Cost

The value of the next-best alternative forgone when making a choice.

Production Possibility Curve (PPC)

A curve showing the maximum feasible combinations of two goods given fixed resources and technology.

Productive efficiency

Producing at minimum cost, typically represented by points on the PPC.

Allocative efficiency

Producing the mix of goods that maximizes societal welfare given tastes and resources.

Growth in potential output

An outward shift of the PPC due to technological progress, more capital, or better human capital.

Growth in actual output

An increase in actual production, which may occur within or outside the PPC depending on resource use.

Sources of economic growth

Technological change; more capital; improved human capital.

Limitations of the PPC

The PPC shows possibilities, not value judgments about best outcomes; prices reveal tastes; allocative efficiency involves society's wishes.

Three fundamental questions of economics

What to produce? How to produce? For whom to produce?

Marginal costs and marginal benefits

The additional costs and benefits of a change, used to guide decision making.

Positive economics

The study of what is, describing and predicting economic phenomena without value judgments.

Normative economics

The study of what ought to be, involving value judgments about policy choices.

Elasticity

A measure of how responsive quantity demanded or supplied is to a change in price.