ECO130 - Topic 1

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  1. Scarcity
    The condition in which human wants are forever greater than the available supply of time, goods, services and resources.
  2. Resources
    The basic categories of inputs used to produce goods and services.

    • Factors of production
    • - Land
    • - Labour
    • - Capital
  3. Land
    A shorthand expression for any resource provided by nature.
  4. Renewable Resource
    Basic inputs that nature can automatically replace without interference from human beings.

    Lakes, crops, animals, clean air.
  5. Non-renewable Resource
    Basic inputs that nature will not automatically replace.

    Coal, oil, copper, iron ore.
  6. Labour
    The mental and physical capacity of workers to produce goods and services.
  7. Entrepreneurship
    The creative ability of individuals to seek profits by combining resources to produce new or existing products.
  8. Capital
    The physical plant, machinery and equipment used to produce other goods.

    Capital goods are human-made goods that do not directly satisfy human wants.

    Industrial Revolution - tools, axe, hoe bow and arrow.

    Today - factories, buildings, trucks, computers.
  9. Economics
    The study of how society chooses to allocate its scarce resources to the production of goods and services in order to satisfy unlimited wants.
  10. Microeconomics
    The branch of economics which studies the decision-making by a single individual, household, firm or industry.
  11. Macroeconomics
    The branch of economics which studies the decision-making for the economy as a whole.
  12. Methodology of Economics
    • Identifying the problem
    • Developing a model
    • Testing the model
  13. Model
    A simplified description of reality used to understand and predict the relationship between variables.
  14. Ceteris Paribis
    A Latin phrase that means while certain variables change, 'all other things remain unchanged'.
  15. Behavioural Economics
    A branch of economics in which more comprehensive assumptions about human behaviour are employed.

    • - Pleasure/pain principle
    • - Ethical and moral beliefs
  16. Experimental Economics
    A branch of economics in which experiments designed to mimic real-world scenarios are used to explore aspects of human behaviour relevant to economics.
  17. Positive Economics
    An analysis limited to verifiable statements.
  18. Normative Statements
    An analysis based on value judgements.

    Good, bad, should, ought, need...
  19. Enlightened Self-Interest
    Involves members of the community respecting the laws and social mores of society while they pursue their own individual goals.
  20. Direct Relationship
    A positive association between two variables.

    Increase/decrease in one = Increase/decrease  in the other
  21. Inverse Relationship
    A negative association between two variables.

    An increase/decrease in one = a decrease/increase in the other
  22. Slope
    The ratio of the changes in the variable on the vertical axis to the change in the variable on the horizontal axis.

    Slope = rise/run
  23. Independent Relationship
    No association between two variables.

    One changes, the other remains unchanged.
  24. Index Numbers
    Indicate the changes in the value of a variable over time where the value of a variable in the base year is set at 100.
  25. Graph
    Means of clearly showing economic relationships in two-dimensional space.
  26. Movements Along
    Occur when there is a change in one of the variables shown on the coordinate axes of the graph.
  27. Shifts in
    Occur when there is a change in a variable that is not shown on the coordinate axes of the graph (ceteris paribus is relaxed).
  28. 3 Fundamental Economic Questions
    • What to produce
    • How to produce
    • For whom to produce
  29. Opportunity Cost
    The best alternative sacrificed for a chosen alternative.
  30. Marginal Analysis
    An examination of the effects of additions to or subtractions from a current situation.

    It considers the effect of change.
  31. Production Possibilities Frontier (PPF)
    Shows the maximum combinations of two outputs that an economy can produce, given its available resources and technology.

    Scarcity limits the economy to points on or below its PPF.
  32. Technology
    The body of knowledge applied to how goods and services are produced.
  33. PPF Assumptions
    • Fixed resources
    • Fully employed resources
    • Technology unchanged
  34. Law of Increasing Opportunity Costs
    The principle that the opportunity cost increases as the production of one output expands.
  35. Economic Growth
    The ability of an economy to produce greater levels of output, represented by an outward shift of its PPF.
  36. Achieving Economic Growth
    • Changes in resources
    •  - Any increase in resources will shift the PPF outward.

    • Technology change
    • - Research and development of new technologies.
  37. Investment
    The process of producing capital, such as factories, machines and inventories.
  38. Gains from Trade
    Comparative advantage - the ability of a country to produce a good at a lower opportunity cost than another country.
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ECO130 - Topic 1
2015-03-19 07:54:34
ECO130 - Topic 1 (1,2)
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