1.1-2 - Economics as a Social and Applied Science

Economics

- Seeks to understand how choices are made (decision-making)

- A social science as it seeks to study humans with empirical tools

Observe and Experiment

- empirical tools in economics

Scarcity

- Limited availability of a resource, good, or service

- Resource is scarce when a quantity has limited availability to the demand for it

Ex. Oil, Land, Rice

Shortage

- when the demand is greater than the supply for a good, product, or service

Choice

- Because there is scarcity, people have to choose which want or need they have to satisfy first

- People decide how to allocate their limited resources

Utility

- Satisfaction or usefulness the consumption of a good can bring

- One of the considerations when making decisions

Opportunity Cost

- What we give up by choosing something else

- The value of the next best alternative

- Includes the monetary costs, time, and effort

Microeconomy

- Small; subset of economics that focuses on the decisions of smaller agents

Macroeconomy

- Subset of economy that focuses on the decisions of groups

Tiger Economy

- Refers to rapidly growing economies in Asia, especially those countries transitioning from agrarian society to industrialized nations

South Korea, Taiwan, Hong Kong, Singapore

- the original tiger countries

What should we produce

- Asks what products and services an economy should focus on producing

•Considerations:

• Resource availability

• Consumer demand

How should we produce it

- Asks what methods will be used in order to produce the goods and services needed

•Considerations:

• Does the country use automated technology to produce, or does the country produce using manual labor, or both

For whom should we produce it

- Asks who should receive the final goods and services produced by the economy

- Another consideration is whether goods should be given to those who can afford it

Land

- Consists of all natural resources, physical land, and raw materials

Physical Land

- agricultural land used for farming, for commercial or residential land development to create goods and services

Natural Resources

- materials derived from land such as water, gold, copper, and oil

Labor

- Tangible human effort in the production process

- Contributions of the workforce, whether physical or mental

Skilled Labor

- workers with specialized training or expertise (engineers, doctors)

Unskilled Labor

- workers performing basic tasks requiring little training (factory workers, sales associates)

Professional Labor

- professionals engaged in professional services (teachers, lawyers, consultants)

Capital

- Investments made to improve production

- Can come in the form of physical capital or human capital

Physical Capital

- physical tools and equipment that make production more efficient

Human Capital

- skills and knowledge of the workers

Entrepreneurship

- The intellectual capacity to organize and put together other factors of production to produce goods and services the society needs

Economic Growth

- Overall expansion of an economy

- Does not accurately represent the welfare or well-being of the members of a particular society

- Measured by an increase in gross domestic product (GDP)

Gross Domestic Product

- products and services produced within the country’s borders

- affects the economy because it gives opportunities and more jobs

Economic Development

- Measure of the welfare of an economy’s members

- Looks at the quality of life and living standards

Sustainable Development

- Economic development that meets the needs of the present without compromising the needs of future generations

Inclusive Growth

- One of the key goals of AmBisyon 2040

- Growth that not only benefits the elite but helps all members of a society