econ unit 1

Fallacy

A hypothesis that has been proven false but is still widely accepted as true because it seems to make sense.

Appeal to pity/guilt fallacy

A fallacy that points out a bad consequence that might happen, such as the claim that adopting a puppy is urgent because it will be euthanized.

Slippery slope fallacy

Assuming that a small action will lead to an extreme outcome, like claiming marijuana leads to hard drug use.

Fallacy of composition

The mistaken belief that what is true for one is true for all, for example, assuming all farmers will plant corn because corn prices are high.

Post hoc fallacy

The mistaken belief that what occurs just before an event caused that event.

Fallacy of single causation

The mistaken belief that a particular event has only one cause.

Law of increasing relative costs

The increase in relative cost of producing more of one good relative to another due to resource allocation.

Law of diminishing returns

The eventual decline in the rate of extra outputs produced when one input is held constant and others are increased.

Law of increasing returns to scale

An increase in the rate of extra outputs produced when all inputs are increased.

Production possibility curve (PPC)

A graph that shows the maximum feasible quantities of two products that can be produced using fixed resources and technology.

Resources (Factors of Production)

Inputs used to produce goods and services, including land, labor, capital, entrepreneurship, knowledge, and environment for enterprise.

Land (Resource)

Includes all natural resources used to produce goods.

Labor (Resource)

Includes all physical and mental efforts contributed by people.

Capital (Resource)

Includes machinery, tools, equipment, and money used to produce goods/services.

Entrepreneurship (Resource)

The contribution made by an owner or manager who organizes land, labor, and capital.

Knowledge (Resource)

Includes experience, specialized education and training, and applied technology.

Environment for enterprise and business (Resource)

Includes the climate of political and economic stability, social values supporting business, and a good work ethic.

Tangible Resources

Physical resources that are visible and easily quantified (land, labour, capital).

Intangible Resources

Resources that are less visible and hard to quantify (entrepreneurship, knowledge, environment).

Crown Land

Land owned by the government (comprising 89% of Canada).

Ideology

A system of ideas forming the basis of economic or political theory.

Liberalism

Enlightenment movement replacing traditional conservatism with individualism, rights, and representative democracy.

Democracy

Political system with a freely elected government representing the majority for a set term.

Conservatism

Movement to preserve traditional institutions, customs, and values.

Dictatorship

Political system where absolute authority is exercised without free elections.

Capitalism

Moderate right ideology featuring private ownership, profit motive, and democratic elections.

Communism

Extreme left ideology based on Marx, featuring community ownership and command economy.

Socialism

Moderate left ideology featuring public ownership and democratic, peaceful elections.

Fascism

Extreme right, non-democratic government with a dictatorship and free-market economy.

Political Stability

Stable government helping long-term planning, investor confidence, and economic growth.

Reduced Public Debt

Addressing rising public debt and yearly government budget deficits.

Economic Growth

An increase in GDP (production of goods and services)

Productivity and Efficiency

Maximizing productivity so scarce resources are used efficiently

efficiency results from healthy competition

Equitable Distribution of Income

Fair distribution of wealth (subjective & controversial due to diff defs and many stakeholders)

Price Stability

Stable prices indicating a healthy economy, measured by the CPI

Inflation

General increase in prices or money supply causing declining currency purchasing power.

Deflation

The general decrease in prices of goods/services

Full Employment

Defined as between 6% and 7% of the labor force out of work.

goal for optimal production targets

Viable Balance of Payments and Stable Currency

Accounts tracking currency transactions between Canada and foreign countries.

If Canadian imports > exports, -effect on employment rates and CAD

Economic Freedom

Choices available to workers, consumers, and investors, including consumer sovereignty.

Environmental Stewardship

Economic activity pursued without significantly harming the natural environment.

Canada's 10 economic goals

Political stability

Reduced public debt

Economic growth

Increased productivity and efficiency

Equitable distribution of income

Price stability

Full employment

Viable balance of payments and stable currency

Economic freedom

Environmental stewardship

what can economic growth result from?

discovery of natural resources

increase in skilled labour

tech innovations

more efficient production

what is a budget deficit

when a government spends more than what it receives in revenue

four policies of great leap forward

four pests, peoples communes, development of industrial areas, backyard furnaces

impacts of great leap forward

great chinese famine, 20-43million died due to improper grain growing and distribution—result of government overreach (central planning committee) and heavy economic control

what was mao influenced by

nationalism, modern concepts of progress, marxism, western industrialization

economics

practical and social science that studies the way society makes decisions abt the use of scarce resources

economy

self-sustaining system with independent transactions in a society that create distinct flows of money and products

economic system

laws, institutions, and common practices that help a nation determine how to use its resources to satisfy as many of its peoples needs and wants as possible

effective use of resources

Using resources ethically to produce product, may result in higher costs

efficient use of resources

Using bare minimum of resource to produce the most amount of product, may not be ethical for environment / human rights

scarcity

limited resources, like natural resources

three production questions

what to produce, how to produce, for whom to produce

types of economies

traditional, command, market, mixed market

traditional economy

Practices of the past determine answers to the production questions

goods/services produced are traditional, same as olden

barter trade

practices = passed down, output doesnt change much year/year

command economy

Central planning authority answers the questions and makes the decisions (ex. Mao’s china)

indiv has obligation to serve state and authorities reward them

resources/production owned by state

leaders influence entire economy

market economy

aka free-enterprise bc evb acts for themselves (out of self-interest)

buyers and sellers alone answer the production questions

everything privately owned

mixed economy

Decisions of central planning authority plus actions of indiv buyers and sellers work together to answer the three production questions

beauracracy

govt with lots of red-tape and specialization of functions, heavy hierarchy of authority

agrarian economy

Economy based in rural areas that is centered on production, consumption, trade, and sale of agriculture (incl plants and livestock)

industrialization

increasing mechanization of a society

mercantilism

barber has a weird def…

System was based on state control of econ production and trade w goal of exploiting goods and importing few foreign goods

result of age of exploration and revolve around cash crops

protectionism

government policies that restrict int’l trade to support domestic industries, often through tariffs, quotas, and subsidies

laissez faire

Doctrine of non-interference so that things can work out naturally

adam smith

basically he made up capitalism and the free-market from the ideas of the physiocrats

Since ppl have a natural tendency to serve their best interest + acquire wealth, pursuit of self-interest would benefit all indivs if they were left alone to create more wealth

the invisible hand

Market competition orders the econ towards the most efficient and productive state

self-interest

each person is motivated by self-interest and to better our condition

Profit motive provides the major stimulus for econ growth and prosperity

Society requires greater production to satisfy wants

It doesnt appeal to generosity of producers, but to their desire to increase their own profit

opportunity cost

the amount you give up (of the second best alternative) by making your choice