Basic Concepts in Economics

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TongaDroid
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211169
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Basic Concepts in Economics
Updated:
2013-04-03 12:59:32
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Micro Economics
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Basic Concepts in Economics, Micro-Economics
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  1. What is Macro-Economics?
    This is the study of the performance of whole national economies and governments policies to improve their performance.
  2.  

    What is money?
    It is the mode/medium of exchange for goods and services. Anything that is generally accepted in the settlement of debts
  3. Supply
    Putting a commodity, on the market for sale.
  4. Price effect
    Increase in price will decrease demand and vise versa
  5. Law of diminishing returns


    Utility diminishes with extra unit consumption of a good or service. (Increases at decreasing rate)
  6. Marginal utility


    Extra utility, from consumption of extra units, of a good or service.
  7. Utility
    The ability of a good or service to satisfy human wants and needs (increases at decreasing rate)
  8. Market demand
    Total quantity demanded by consumers.
  9. Individual demand
    The amount bought by an individual over a period of time.
  10. Demand Schedule


    • Tabular representation of quantity demanded at varying price level.
    • Or Numerical representation of inverse relationship between price and quantity demanded.
  11. Demand curve


    Graphical representation of quantity demanded at varying price level. (Normally slopes left to right)
  12. Law of demand


    The higher the price, the lower the demand and vise versa (Inverse relationship)
  13. Demand
    Desire for a good and the ability to pay.
  14. Equilibrium price
    When planned demand, equals planned supply.
  15. Prices are determined by?
    • Auction
    • Price leadership
    • Legislation
    • Bargaining/haggling
    • Treaties
    • Demand and Supply
    • Collusion
    • Resale price maintenance
  16. For goods and services to have value,
    they must posses.


    • Scarcity
    • Utility
    • Transferability
  17. Price


    Value of a good in monetary terms.
  18. Price Theory


    Is concerned with economic decisions of individual consumers and producers, it explains allocation, consumption and pricing.Or flow of goods and services from producers to consumers.Looks at production, consumption, allocation and pricing.
  19. Command (Centrally planned)


    Economic (Fundamental) questions planned by central government.
  20. Mixed economy
    Cross breed of command and free market economies.
  21. Traditional system
    Factors of production determined by community leaders or social or cultural norms
  22. Pure capitalist (Free market economy)
    Factors of production controlled by market forces of demand and supply.
  23. Types of economic systems


    • Pure capitalist (Free market economy)
    • Traditional system
    • Mixed economy
    • Command (Centrally planned)
  24. Economic Systems


    A means by which a society makes economic decisions.Or is way society decides on the five Ws.
  25. Name two key economic assumptions.
    People act in self interest.

    People make informed decision. (Consumers are rational)
  26. Ceteris paribus is?
    “Other variables held fixed”
  27. Variable is?


    A measure of something that can take on a different value.
  28. Entrepreneurship is?


    Effort used to coordinate and produce goods and services
  29. Human capital is?


    Human knowledge and skills used to produce goods and services.
  30. Physical capital is?
    Objects made by humans to produce goods and services. E.g machines, buildings
  31. Labor is?


    Human physical and mental effort used to produce goods and services.
  32. What are natural resources?
    These are naturally occurring things used to produce good sand services. E.g land, oil
  33. What are factors of production?
    These are resources needed to produce goods and services.
  34. What is the Production Possibility Curve/Frontier?
    Graphical curve which shows a combination of two or more goods that can be produced in a country when all its resources are fully utilized.
  35. Opportunity cost


    The alternative choice forgone when making a choice. (The opportunity cost of something is what you sacrifice to get it)
  36. Choice
    The right decision one makes when purchasing using a preference scale.
  37. Scarcity


    Limit or shortage of resources in proportion to demand(population)
  38. Fundamental questions in economics


    • What to produce?
    • How to produce?
    • For whom, to produce?
    • When to produce?
    • Where to produce?
  39. Normative economics


    • This involves recommendations based on personal value judgment.
    • It does not involve scientific proof or research.
  40. Positive Economics


    Refers to objective economic statements that explain if certain conditions hold them, things can be expected to happen.It deals with issues that can be observed and explained scientifically. E.g. research
  41. Name two branches of Economics
    Normative economics

    Positive Economics
  42. Functions of money
    • Medium of exchange
    • Store of wealth
    • Standard of deferred payment
    • Measure of value
    • Enables specilisation
    • Unity of account
  43. Qualities of Money


    • Scarcity
    • Homogeneity
    • Durability
    • Portability
    • Divisibility
    • Acceptability
    • Security (against forgery)
  44. What is micro-Economics?
    This is the study of economic activities of individuals and small groups of economic agents(consumers, resource owners and producers).
  45. What is Economics?
    • This is the study of human behaviors and how we relate to the
    • scarcity of resources.

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