Introduction to Economics

These flashcards cover the fundamental vocabulary and concepts of introductory economics, including types of scarcity, economic resources, branches of economics (Macro and Micro), and different economic systems.

Economics

A social science concerned with using scarce resources to obtain the maximum of the unlimited wants of society.

Oikonomus

The Greek word from which "economics" is derived, meaning household management.

Adam Smith

Recognized as the Father of Economics.

Scarcity

A condition where there are insufficient resources to satisfy all the needs and wants of a population.

Economic Resources

The problem of having unlimited wants, but limited resources to satisfy them; categorized into land, labor, and capital.

Relative Scarcity

When a good is scarce compared to its demand.

Absolute Scarcity

When supply is strictly limited by physics, nature, or time.

Opportunity Cost

Refers to the value of the best foregone alternative.

Alfred Marshall

Described economics as the study of mankind in the ordinary business life.

Natural Resources

Resources that came from nature used in production, including land, raw materials, and natural process.

Capital Resources

The processed materials, equipment, and buildings used in production.

Human Resources

The efforts of people involved in production, including labour and entrepreneurship.

Needs

The essentials of life, such as food and shelter.

Wants

Desires for non-essential items.

Land

Soil and natural resources used in production that are not man-made; its owners receive rent.

Labor

Physical and human effort exerted in production, covering manual workers and professionals.

Capital

Man-made resources used in the production of goods and services, including machineries and equipment.

Rent

The payment known to be received by owners of lands.

Interest

The income earned by the owner of capital.

Macroeconomics

A division of economics concerned with the overall performance of the entire economy.

Microeconomics

Studies the decision and choices of individual units and how these affect the prices of goods in the market.

Price Theory

Another term for the process of setting prices of goods, which is a concern of Microeconomics.

Gross Domestic Product (GDP)

Measures the total value of all goods and services produced within a country’s geographic borders over a specific period.

Gross National Product (GNP)

Measures the total value of all goods and services produced by a country's permanent residents and businesses, regardless of location.

What to produce and how much?

The basic economic problem of deciding which goods and services and in what quantity should be produced to meet people's needs.

How to produce?

A question on the production method, resource mix, and technology that will be applied in production.

For whom to produce?

The question concerning the target market and how produced goods and services should be distributed among the population.

Traditional Economy

An economic system where decisions are based on traditions and practices passed on from generation to generation.

Command Economy

An authoritative system where decision-making is centralized in the government or a planning committee.

Market Economy

The most democratic economic system where decisions are based on the workings of demand and supply.