Unit 1 - Economics: Introduction

Vocabulary flashcards covering key economic concepts, theories, and historical figures from the lecture notes on Economics Introduction.

Economics

A social science that studies how people use scarce resources to satisfy their unlimited wants; the study of scarcity and choice.

Scarcity

The most basic economic problem; anything that is available in limited quantities; it causes economic problems due to unlimited human wants.

Choice

The necessity to decide how to allocate scarce resources due to unlimited human desires, forming the core study of economics.

Positive Statements

Statements of fact that are expressed in a testable manner.

Normative Statements

Value judgments or statements of opinion that cannot be verified.

Fallacy

A hypothesis that has been proven false but is still accepted by many people because it appears to make sense.

Fallacy of Composition

The mistaken belief that what is good for the individual will automatically be good for the group (society).

Post-Hoc Fallacy

The mistaken belief that because Event B occurred after Event A, Event B must have been caused by Event A; also known as the Cause-and-Effect Fallacy.

Fallacy of Single Causation

The mistaken belief that a single factor or person caused a particular event or outcome, leading to oversimplification.

Direct Costs

The actual economic cost required to do something.

Opportunity Costs

What you give up when you get something else.

Production Possibility Frontier (PPF)

The maximum combinations of two goods or services an economy can make using all resources efficiently.

Increasing Opportunity Cost

Occurs when more and more production of one product must be sacrificed as production of the other product increases.

Absolute Advantage

When a producer can supply a product more efficiently than can other producers.

Comparative Advantage

When a producer can supply a product with a lower opportunity cost than can other producers.

Law of Diminishing Returns

If you keep adding more of one input (like workers) to a fixed input (like machines or land), eventually each extra input will add less and less output.

Free Market Approach (Capitalist)

An economic system where a country's resources are owned privately by individuals and businesses, who also decide how resources are used.

Command Approach (Communist/Socialist)

An economic system where the government owns and controls the resources and government officials determine how resources are allocated.

Mixed Economies

Economic systems adopted by all countries, combining elements of both free market and command approaches.

Adam Smith

Known as the 'Father of Economics,' author of 'The Wealth of Nations' (1776), and a supporter of the free market concept of the 'invisible hand.'

Invisible Hand

A metaphor for how individuals pursuing their own self-interest can unintentionally create benefits for society as a whole.

Karl Marx

Author of 'The Communist Manifesto' (1848), a supporter of socialism, who believed capitalism's inherent greed would lead to social revolution.

Index of Economic Freedom

An index that scores nations on broad factors of economic freedom, such as business freedom, trade freedom, and property rights.

Liberal Ideology

A 'left-wing' political approach emphasizing social programs, environmental protection, and government regulation, often associated with larger government spending.

Conservative Ideology

A 'right-wing' political approach emphasizing limited government regulation, lower taxes, privatization, and defense, often associated with smaller government spending.

Microeconomics

The branch of economics that examines the behavior of individual economic units (consumers and businesses), covering topics like supply and demand.

Macroeconomics

The branch of economics that examines the economy as a whole, concerned with the combined behavior of consumers and producers, covering topics like inflation and unemployment.