EC 211 – Flashcard

Economics is the study of how individuals and society end up choosing, with or without the use of money, to employ scarce, productive resources, which could have alternative uses, to produce various commodities. It studies how the commodities are distributed for consumption, now and in the future, among various people and groups in society.

Oikos: home Nomos: management of economics: management of home

Microeconomics focuses on the specifics of economics. It studies the behavior of consumers and producers and the determination of market prices and quantities transacted of factor inputs and goods and services.

Macroeconomics is concerned with the big picture of economics. It is concerned with the study of aggregate economic activity. Macroeconomics seeks to identify strategic determinants of the levels of national income and output, economic growth, inflation, employment, money, prices, and international trade through fiscal policy, monetary policy, and commercial policy

An exchange mechanism that brings together sellers and buyers of some commodity (goods, services, inputs, and financial securities)

This refers to specializing people in specific areas of work. By doing this more jobs are opened up in the market. It is significant because of labor specialization.

Land, Labor, and Capital is allocated depending on Demand and Supply. The market will allocate resources according to the needs.

Barter is the exchange of one commodity for another without money. It is eliminated in order to put money back into the market. This helps in growing the economy by adding more monetary value to it. Eliminating barter means eliminating the coincidence of wants. In a barter economy, in order to exchange commodities, we have to work together with other to exchange for each other's wants; if they don't coincide, there is no barter.

One in which the price of the commodities are set to cover the cost of production. It is a part of the Economic Sector.

One in which the price is independent from covering or not the cost of production. It is a part of the Economic Sector.

One that is owned by the Household or Business sector. It is a part of the Legal Sector.

One that is owned by the government. It is a part of the Legal Sector.

MPr: Boeing MPb: USPS NMPr: ERAU/Salvation Army NMPb: Red Cross/ASU

a. The decision making process of the household sector is expected to be rational and logical b. The members of the household sector are the owners of the factors of production c. The main objective of the household sector is pursuit of satisfaction

a. The decision making process of the business sector is expected to be rational and logical b. They are the buyers of the factors of production c. The main objective of the household sector is pursuit of profitability

a. The decision making process is neither rational nor logical b. The main objective of the household sector is pursuit of the four P's: Power, Prestige, Promotion, and Personal Aggrandizement (feeling of grandeur/being important)

The main objective in international markets is the pursuit of national interest

(Economic Prosperity) Equal to economic growth (quantitative aspects of the economy or the pursuit of "more") PLUS economic development (qualitative aspects of the economy or the pursuit of "better"

The process by which the economy attempts to avoid unexpected ebbs and flows in the economy.

Every member of society should have its basic needs properly satisfied; these are: 1. Food 2. Shelter 3. Clothing 4. Education 5. Healthcare and security 6. Water and sanitation

Quantitative aspects of the economy or the pursuit of "more"

Every member in society should have equal opportunities for economic success regardless of: -ethnicity -race -gender -religion -social class -sexual orientation -disability

Qualitative aspects of the economy or the pursuit of "better"

When 5% or less of the labor force is unemployed; the labor force is anyone 15 + actively looking for work

For those who exercise demand and have monetary votes

That for which there is demand

wherever you will maximize profit (close to resources or customers)

With the least costly input combination that allows for maintaining same level of quality

Almost enough to satisfy the demand

When the most important input is more abundant

...states, ceteris paribus, that a rise in the price of a commodity, conveys an increase in the quantity supplied, and vice versa

...states, ceteris paribus, that a rise in the price of a commodity, conveys a decrease in the quantity demanded, and vice versa

Economic system in which the means of production, distribution, and exchange are privately owned and operated for private proft.

Economic system emphasizing collective ownership of the means of production, ascribing a large role to the government in the running of the economy with widespread public (State) ownership of key industries.

Economic system in which the means of production, distribution, and supply are owned by the proletariat, with the wealth shared on the principle of "to each according to his need", each yielding fully "according to his ability." Proletariat: In a capitalist society, they are the industrial wage earners possessing, neither property nor capital and living by the sale of their labor at meager-exploitative wages.

A combined economic system of any of the following: Socialism, Communism, Capitalism. Mostly, a system combining capitalistic and socialistic economic agendas.

The exchange of goods and services for other goods and services without cash

Anything for which the price of a commodity is bigger than 0 is scarce

The cost of using resources for a certain purpose, measured by the benefit given up by not using them in their best alternative use

Commodities that are free with the purchase of another commodity. Example: Buying toothpaste and getting a free toothbrush

Commodities that are purchased together and consumed together. Example: Weisswurscht and Sweet Mustard

A curve that shows all possible combinations of commodities that can be produced in the economy, given the available productive resources, their use efficiency, and the existing state of technology.

The selected array of rules and regulations enacted by governments in order to pursue social peace and public order.

The selected array of rules and regulations enacted by governments in order to pursue economic prosperity and higher standards of living.

The set of steps and actions undertaken by government to achieve economic objectives.

The government of old men

The government of young people

Government by a small, priveleged, hereditary class, drawn from leading families bearing titles of nobility

The government of priests or men claiming to know the will of God; governments will be heavily influenced by orthodox religious groups claiming to represent all divine will

Government by a single absolute ruler; also referred to as a dictatorship

Government by the people, usually through elected representatives

Government by officials and their routine world of cumbersome regulations

Government by technical experts; by administrators (Administocracy) with university degrees

Government by which power is in the hands of few influential families

Government by the rich

1. Private Property: Land, labor, and capital are not owned by the government, but rather privately by members of the household and business sectors. This correlates with no one being responsible for these resources. As an example, there is the cows and bison paradox, where, bison are publically owned and no one cared for them, yet cows are privately owned and flourish. 2. Self-Interest: self-interest, and along with it selfishness, are what drive economically active people to express their free choices with the ultimate goal of achieving what is best for themselves. 3. Geographic Specialization: Producing where inputs are present is most efficient by producing more than the necessary amount, therefore allowing the excess to be sold in more national and global areas, opening up trade opportunities outside of the local community.

1. Consumer Sovereignty: Consumers who have monetary votes decide where to spend their money. Through this privilege, consumers have economic authority and power over types and quantities of commodities produced. Consumers' income will be spent wherever they individually choose to spend it. 2. Guiding Function of Prices: Prices are a guide in consumers' changes in demand for commodities. When prices in the market fall or rise, it is an indicator in corresponding changes in consumer tastes, preferences, and necessities. Production should meet demand, and therefore these patterns can be an indicator of required change in production patterns. 3. Promoting Efficiency: The economic market is an extremely competitive field, which constantly requires the best and most up-to-date technologies in order to enable efficient techniques in production. Therefore, with passing time and continuous improvements in technology and production techniques, the market system encourages development and adoption of new and better production techniques.

1. Promotes Egoism: Egoism means that self-interest is most important and comes before all else, including other people. In capitalist societies, the trade and industry are privately owned, which promotes competition to the point of survival of the fittest. Every member in society is in charge of his/her own life and success, regardless of anyone else. 2. Competition: Similar to the way that capitalism promotes egoism, it also promotes competition, where only the strong will survive. This is at the cost of businesses and livelihoods because competition becomes brutal, rather than being friendly and respectful in nature. 3. Promotes Materialism: Capitalism causes both individuals and businesses to become excessively concerned with material possessions. Because of egoism and self-interest as a priority, the difference between what one actually needs in order to live comfortably, healthily, and happily, and what one wants in an intense and selfish nature is forgotten.

2. Freedom of Enterprise: Ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services and to sell them in their chosen markets. 3. Freedom of Choice: (a) Enables owners to employ or dispose of their property and money as they see fit. (b) It also allows workers to enter any line of work for which they are qualified. (c) Finally, it ensures that consumers are free to buy the goods and services that best satisfy their wants. 5. Competition: This refers to the freedom of choice exercised in pursuit of a monetary return, and it requires (a) independent acting buyers and sellers operating a particular product or resource market, and (b) freedom of sellers and buyers to enter or leave markets on the basis of their economic self-interest. 6. Markets and Prices: These give the system its ability to coordinate the millions of daily economic decisions conveyed by buyers and sellers of products and resources. The decisions made on each side of the market determine a set of product and resource prices that guide resource owners, entrepreneurs, and consumers as they make and revise their free choices and pursue their self-interest. 7. Technology and Capital Goods: Competition, freedom of choice, self-interest, and personal reward provide opportunity and motivation for technological advance since the monetary rewards for new products and production techniques accrue directly to the innovator. 8. Labor Specialization: Self-sufficiency breed inefficiency, therefore, division of labor contributes to society's output (a) by making use of differences in ability and skill, (b) by fostering learning and result expediency by doing, and (c) by saving time when avoiding wastage when shifting tasks from one job to another. 10. Use of Money: It performs the first and foremost function of being an efficient medium of exchange and eliminates the onerous expectation of coincidence of wants required in a barter system. 11. Active, but Limited Government: Condition required to control and avoid some of the excesses characteristic of a capitalist society, and it should promote efficiency in the use of society's resources.

2. Market Restraints on Output Decisions: Firms are not really free to produce whatever they wish since consumers' buying decisions make the production of some products profitable and the production of other products unprofitable, thus restricting the choice of businesses in deciding what to produce. 4. Promoting Economic Progress: Through the natural forces of the market there is a natural encouragement of technological improvements and capital accumulation; two changes that lead to greater productivity and higher level of economic well-being. 6. Providing Incentives: The market system encourages skill acquisition, hard work, and innovation. In turn, these incentives translate into the greater levels of production and the higher incomes that increase society's standards of living. 7. Enabling Freedom: The market system coordinates economic activity without coercion (though with some degree of regulation) by allowing entrepreneurs and workers to freely further their own self-interest.

1. Promotes Elitism: The view that some people belong to elites while others do not. Elitism places people in in-groups and out-groups; either you are in or not, either you have certain status symbols or you don't. Capitalism encourages social hierarchy. 4. Imposition of Power: Capitalism gets power over others promoting an interpersonal power-structure among people. This promotes a kind of master-slave relation at the psychological level that is not as prevalent in less competitive societies. 5. Dehumanization: In the case of modern globalized hyper-capitalism, where profit become the only value, people are not even competed with, they are overlooked as human beings, and regarded as a "staff resource" akin to a slave. 7. Promotes Economic Inequality: Economic system that increases the gap between the income of the poor and the income of the rich. There is an inherent unequal sharing of blessings since not everybody benefits in society when the world is perceived divided between "winners" and "losers". 8. Promotes Corruption: When power is over-concentrated there is a loss on the perception of reality and of the rights of the disposed (economic minorities even though they usually are mathematical majorities). Also, capitalism seems to promote the impairment of integrity, virtue, or moral principle; enhancing a departure of what is pure and correct.