CIA4U-1 Grade 12 Economics

What is the definition of Economics

A: Economics is the study of how we make decisions about the use of scarce resources to satisfy our unlimited wants and needs.

What is Microeconomics?

A: Microeconomics studies the economic behaviors of individuals, households, and companies, focusing on how prices are set within a market and how incomes are distributed.

What is Macroeconomics?

A: Macroeconomics takes a wider view, focusing on economies at a larger scale, such as regional, national, or global economies, including households, businesses, governments, and foreign markets.

What is the fundamental problem that the economics addresses

A: The fundamental problem is that society has limited resources to satisfy unlimited wants and needs.

What are he 4 factors of production and describe them!

The four factors of production are:

• Natural resources: Land, raw materials, and natural processes like sunlight and water.

• Capital: Processed materials, equipment, and buildings.

• Human resources: Labor (workers) and entrepreneurs (risk-takers and innovators).

• Entrepreneurial resources: An individual managing the gathering, allocation, and distribution of economic resources or consumer products.

What is Opportunity Cost

A: Opportunity cost is the value of the next best alternative that you give up when you make a decision.

What is the Law of Diminishing Returns?

The law of diminishing returns says that, if you keep increasing one factor in the production of goods (such as your workforce) while keeping all other factors the same, you'll reach a point beyond which additional increases will result in a progressive decline in output

What is the Law of Increasing Returns to Scale?

This concept refers to the situation where, when all inputs (labor, capital, etc.) are increased by a certain percentage, the output increases by a greater percentage. This usually happens when businesses can achieve economies of scale, where the average cost per unit falls as production expands.

Why must decision-makers consider opportunity costs?

A: Decision-makers must consider opportunity costs because resources are limited, and choosing one option means sacrificing another.

What is the differences between Effective and Efficient resource use?

A: Effective resource use means achieving desired results with a given amount of resources, while efficient resource use means achieving those results with the bare minimum of resources necessary, allowing for the use of saved resources elsewhere.

What happens when more resources are allocated to the production of one product?

A: When more resources are allocated to the production of one product, resources must be shifted away from the production of another product, meaning one increases while the other decreases.

How is economics defined as a practical science?

A: Economics is the practical science of producing, distributing, and using goods, services, resources, and wealth.

What is the origin of the word “economics”

A: The word "economics" comes from the Ancient Greek word "Oikonomia," where "Oikos" means house and "Nemo" means to manage.

Why do individuals and societies face economic problems

A: Individuals face economic problems because time and money are scarce, while societies face economic problems because basic resources are limited.

What is the goal of Economizing in Economics

A: The goal of economizing is to make decisions that satisfy the largest number of material wants while using the smallest amount of resources possible.

Who is responsible for managing the gathering, allocation, and distribution of economic resources or consumer products in the economy?

A: A manager or decision-maker responsible for overseeing the efficient use and distribution of resources or products.

What are goods

A: Goods are items that people purchase in the marketplace, such as consumer goods for daily use (e.g., shampoo) and capital goods (e.g., tools) used to produce other items.

What is discretionary income, and which group typically has the most of it?

A: Discretionary income is money left over after all expenses are paid, and teens typically have the most discretionary income.

What is the difference between consumer goods and capital goods?

A: Consumer goods are used in everyday living, like shampoo, while capital goods are used to produce other goods, like tools and equipment.

4: What are fixed goods, and why can they become an economic issue?

A: Fixed goods, like land, have a limited supply and cannot be replenished. They become an economic issue when green spaces are developed for human purposes, reducing natural landscapes and biodiversity.

What are the benefits and drawbacks of development?

A: The benefits of development include increased employment, while the drawbacks include eliminating natural landscapes, increasing traffic and pollution, and not always benefiting the common good.

What are public goods

A: Public goods are resources we all share, like air, water, and electricity.

How should we approach public goods in terms of economic goals?

A: We should aim to achieve the right goals (effectiveness) in the right way (efficiency) when managing public goods.

What are economic goods

A: Economic goods are tangible items that satisfy human wants. They can be essential, like food, or non-essential/luxury items, like phones.

What is materialism, and can material goods have a positive purpose?

A: Materialism is often seen as a negative focus on material possessions, but material goods can be used for noble purposes, such as saving lives.

What are services, and what are the two types?

A: Services are actions done for others. Public services are provided by the government (e.g., teachers, postal workers), while private services are offered by businesses or individuals (e.g., business owners, contractors).

Why is economics called the “Science of Opinion”

A: Economics is called the "science of opinion" because economic issues often arise from conflicting individual wants versus collective wants, which can lead to disagreements.

What is an economy

A: An economy is a complex, interactive system involving interdependent people, groups, and institutions, all motivated by economic goals and transactions.

What is the circular flow model in economics?

A: The circular flow model shows how money moves in an endless loop between producers (businesses) and consumers (households), involving the exchange of goods, services, and resources.

What are the two markets in the circular flow model?

A: The two markets are the resource market, where businesses buy natural, capital, and human resources, and the product market, where businesses sell goods and services to consumers.

What is the difference between Normative and Positive economics?

A:

• Normative = More so opinion-based aspects/statements that are opinion based 

• Positive = based on facts/can be proven numerically

What is Analytical Economics

Study of economic reality and why the economy operates as it does 

• Based purely on economic factors rather than opinions 

• It is composed of positive statements which can be accepted or rejected by applying the scientific method 

  • Proofs either reject or approve of a message 

What is Policy Economics

Deals with how the world ought to be → we can have our own normative views 

• Based on value of judgements and cannot therefore be confirmed or denied solely by reference to facts 

What are Fallacy’s? and what is the Fallacy of Composition

Fallacy = hypothesis that has been proven false BUT is still accepted by many people because it makes sense

Fallacy of Composition 

The mistaken belief that individual benefit automatically translates into social benefits (and vice versa)

•  Assuming that parts or members of a whole will have the same properties as the whole. 

What is the Paradox of Thrift

During an economic recession, if everyone starts saving, the aggregate savings will reduce.

What is the Pot Hoc Fallacy

 Assumption that because event B took place after event A, hence people assume that event B must have been caused by event A. 

• Cause and Effect Fallacy (Other Name)

What is the Fallacy of Single Causation

One thing caused something/only a single factor or person caused a particular event to occurs

What are Economic Models

Used by economists to understand economic behaviors 

• Looks at cause and effect including two or more variables 

• Models are generalizations about or simplification of economic reality 

A good model allows economists “to see the forest instead of the trees”

What are Variables of Economics Models

• Independent variable → variable that changes the dependent variable 

• Dependent → the variable in a casual relationship that is affected by another variable 

• Inverse relationship → Phone price goes up, Sales go down 

• Direct relationships → Pay-raise, more employees working 

What is the PPC

Provides a visual model of the production choices faced by people in a simple economy  

• Assumptions on the Model

  • Only 2 products can be produced 

  • The economy has fixed technology and resources 

  • All economic resources have been employed to full potential

What are the 3 main questions Economists ask?

• What to produce?

• How to produce?

• For whom to produce?

What questions are asked when choosing what to produce ? and how does this connect to the PPC?

• What goods and services should our society produce? And in what quantities

• What is worth producing and what is not 

• What are the opportunity cost of producing these goods and services

What are the main questions economists ask regarding how to produce a good

• By whom, with the resources and in what ways should goods be produced 

• How much automation should be used? How much manual labour 

  • Other factors

    • How can our limited resources be used most efficiently

    • Should products be made in small, privately owned factories or in a large state-owned corporation? 

What are the main economics questions economists ask when choosing whom to produce too

• The country must also determine how its output of goods and services will be distributed 

• How will total output be shared among the different members of society 

• Who will get which goods and services? Will products be shared equally

• On what basis should a decision concerning distribution be made? 

What is an Economic System

When countries answer the 3 basic questions in their specific way this results in an economic system.

• Sets of laws, institutions, and common practices that help a national determine how to use its scarce resources to satisfy as many of its people needs and wants as possible.

What defines a Traditional Economy?

• All economic decisions are based on historical traditions.

• Goods and services, along with production methods, remain the same over time.

• Practices and skills are passed from one generation to the next.

• The economy focuses on survival and sustenance, with little variation in output.

What are some essential questions Traditional Economies ask? and what are the modern implications of it.

• What to Produce → depends on the needs of the family/Surplus is usually traded for other essentials = Barter

• How to produce → Parents teach children necessary skills

• For whom to produce → their own use 

Modern Implications → vary with degrees of modification as traditional economics are insufficient in today economic plan field

What are the advantages and disadvantages of a traditional economy?

• Advantages (Heavy emphasis on spiritual and cultural aspects of life) 

  • Minimal changes as decision are made by a family unity 

  • Little to no damages (environment)

  • Waste and consumption mimized → bringing Stability 

• Disadvantages (Little to no social improvement/ stagnant)

  • No innovation/social improvement → restrains human potential 

  • No long term plan/Limited quality, quantity and variety of goods 

  • 0 individualism hence costumes dictate choice 

What defines a Command Economy?

• Economic decisions are controlled by a central authority, usually the government.

• The government dictates what is produced, how it is produced, and who receives the goods and services.

• There is little room for individual choice or market freedom.

• The focus is on meeting national economic goals like equity, stability, and full employment.

What are some essential questions Command Economies ask?

• What to produce → Determined by central authority

• How to produce → Determined by Central authority for the states interest 

• For whom to produce? → Determined by central authority 

What is the Reward and Punishment model of the Command Economy

• People who contribute toward the economy or state will receives shares of goods and services 

  • If not (penalizes people who do not contribute) 

• The state plan emphasis the product of capital goods over consumer goods 

  • Capital goods: increase economies ability to produce more in the future 

  • Consumer goods: short in supply and have not long term impact 

What are the disadvantages and advantages of a command economy

• Advantages → Points are debatable (Ideal state) 

  • Due to planning less waste and a more effective economy → promotes growth

    • Less surplus 

  • “Equal” distribution of wealth (In a ideal economy) 

  • Individuals serve the state and the state provides for their needs 

• Disadvantages → Inflexible 

  • Bureaucratic and rigid as it’s a very step by step program 

  • Limit individual:  freedom, choice and incentive 

  • Forced to meet produce quotas (quantity over quality)

  •  limited availability of consumer goods 

What defines a Market/Free Market Economy ?

• Economic decisions are driven by individuals and businesses based on supply and demand.

• Prices are determined through competition in a free market with minimal government interference.

• Private property, freedom of choice, and profit incentives guide production and consumption.

• The main focus is on efficiency, innovation, and economic growth.

• Private property 

• Freedom of enterprise 

• Profit maximization 

• Competition

• The government roles is only to provide law and order and to assist economic development

What are the essential questions a free market economy asks?

• How to produce 

  • Determined by the consumer 

  • What will see for the most favorable price 

• What to produce 

  • Decided by producers (efficiently as possible to keep product costs low) 

• For whom to produce 

  • Determined by income levels 

  • Consumers willing and able to pay a favorable price

What are the advantages and disadvantages of a free market economy

• Advantages → Freedom

  • Maximus freedom of individual choice → Profit motive provides incentive to be efficient 

  • Variety of  goods and services available 

  • Competition helps keep quality high and prices low 

• Disadvantages → Market Manipulation (consumers want by advertising) 

  • Income and wealth unevenly distributed 

  • Large producers can influence price 

  • Over-consumption can cause resources to run out 

What defines a Mixed Economy?

• A mixed economy combines elements of traditional, command, and market economies.

• Both the government and private sector play a role in making economic decisions.

• It allows government intervention in areas like welfare, regulation, and infrastructure, while also promoting free-market activities.

• The goal is to balance efficiency with social welfare.

What is the Governments Role in a Mixed Economy?

• Government plays a role in public services (Health-care, education and public transit) 

• provides services in the following manners:

  • People pay out of taxes and the government purchases the services on he public behalf  → Done through Crown Corporations 

• regulates business operations and practices (employment standards, safety standards, regulate prices)

•  redistributes income → employment insurances, welfare, pension and tax credit 

What are Canada’s Economic Goals?

• In 1964, the economic council of Canada identified what is considered to be the 5 main economic fails of the Canadian economy 

  • Income Equity

  • Price Stability

  • Fully Employment 

  • Viable Balance of Payments

  • Economic Growth

  • Economic efficiency  - New goal

  • Environmental Sustainability - New goal

Explain the Economic goal of Income Equity

• Income Equity → Division of Wealth 

  • Most value-laden and controversial goal 

  • Many interpretations of what makes a fair division of wealth 

  • Federal government government attempts to redistribute wealth through transfer payments 

    • Using revenues from one province to make additional social program payment in another 

    • Regional differences further complicate income equality

Explain the Economic goal of Price Stability

• Price Stability → Keeping prices fixed or an even rate 

  • Government tries to minimize fluctuation 

  • Fluctuating prices complicate planning and discourage investment 

    • High rates or inflation and deflate (weak economy/unhealthy economy) 

  • Inflation = increased prices (reduces purchasing power) 

  • Deflation = fall of prices (economic crisis) the great depression 

Explain the Economic goal of Full Employment

• Full Employment → fully efficiency

  • Attempt to reach optimal production targets, governments try to promote the full employment of the labor force 

    • Unemployed workers result in total output levels – BELOW THE PPC

  • Full employment = under 7% or under 7% of  unemployment of the workforces

Explain the Economic goal of Viable Balance of Payments

• Viable Balance of Payments → balance of imports and exports 

  • Canada wants to make more money then were buying 

    • Export needs to be higher than imports

  • Negative effect on employment rates as well as the foreign exchange value of Canadian dollar 

    • Ex: When the U.S. dollar is stronger, they import more from Canada. If the Canadian dollar rises, U.S. imports decrease as Canadian goods become more expensive, reducing productivity.

Explain the Economic goal of Environmental Stewardship

Environmental Stewardship → Moral issue 

• Economic activity must be carried out with regard of natural environment

  • May mean higher prices for consumers and lower profits 

• Raises moral issues: If Canada conducts trade with a country that has lower environmental standards, are the supporting/condoning the policies of the other country

Who was Adam Smith, and what was his contribution to modern economics?

• Adam Smith, often referred to as the "Father of Economics," is most famous for his book The Wealth of Nations (1776).

• He introduced the concept of the invisible hand, suggesting that individuals seeking their own self-interest unintentionally benefit society as a whole.

• Smith advocated for free markets, limited government intervention, and the division of labor as key elements to drive economic prosperity.

Explain Karl Marx’s contributions to economic thought?

• Karl Marx is known for his critique of capitalism, primarily through his works Das Kapital and The Communist Manifesto.

• He developed the theory of historical materialism and the concept of class struggle, arguing that the working class (proletariat) is exploited by the capitalist class (bourgeoisie).

• Marx’s ideas led to the development of Marxism, and he advocated for a classless, stateless society where the means of production are owned collectively.

What are John Maynard Keynes’s key contributions to modern economics?

• John Maynard Keynes is best known for founding Keynesian economics through his work The General Theory of Employment, Interest and Money (1936).

• He argued that during economic downturns, governments should increase public spending and lower taxes to stimulate demand and pull economies out of recession.

• His ideas led to the development of macroeconomics and heavily influenced modern fiscal policy and government intervention in markets.

Who was John Kenneth Galbraith, and what was his contribution to economics?

• John Kenneth Galbraith was an influential 20th-century economist who focused on the power of large corporations and their impact on the economy.

• In his book The Affluent Society (1958), he argued that advanced economies like the U.S. had shifted focus from production to consumption, leading to inequality and the neglect of public services.

• Galbraith promoted the idea that government intervention was necessary to address imbalances caused by large corporate power and consumerism.

What were Milton Friedman’s contributions to modern economics?

• Milton Friedman was a key figure in the development of monetarism and is known for his work on the importance of controlling the money supply to manage inflation.

• In his book Capitalism and Freedom (1962), he advocated for free-market policies, minimal government intervention, and the importance of individual freedom.

• He is also known for his work on the permanent income hypothesis and his criticism of Keynesian economics, promoting deregulation and privatization.

Good Luck also 66 is bad

luck so that why there’s number 67 now