Economic Way of Thinking
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Questions and Answers

Economics deals with the management of scarce resources to satisfy human ______.

needs

The two divisions of economics are ______ and macroeconomics.

microeconomics

Scarcity refers to the limited availability of economic resources relative to society’s unlimited demand for ______.

goods

An ______ is a person who combines the economic resources for use in the production of goods and services.

<p>entrepreneur</p> Signup and view all the answers

Capital refers to man-made goods used in the production of ______.

<p>goods</p> Signup and view all the answers

The problem of scarcity gave birth to the study of ______

<p>economics</p> Signup and view all the answers

The Greek word 'oikos' means ______

<p>household</p> Signup and view all the answers

Ceteris paribus means 'all other things held ______'

<p>constant</p> Signup and view all the answers

Adam Smith is regarded as the 'Father of ______'

<p>Economics</p> Signup and view all the answers

Adam Smith's book, 'Wealth of the Nations' was published in ______

<p>1776</p> Signup and view all the answers

John Stuart Mill and David Ricardo analyzed the political economy's ______ in its national economy

<p>importance</p> Signup and view all the answers

David Ricardo's Theory of Comparative Advantage suggests that nations should export goods where they have the greatest ______

<p>advantage</p> Signup and view all the answers

Karl Marx emphasized that labor must be ______ necessary.

<p>socially</p> Signup and view all the answers

Efficiency refers to productivity and proper allocation of economic ______.

<p>resources</p> Signup and view all the answers

Equity in economics means justice and ______.

<p>fairness</p> Signup and view all the answers

Effectiveness means attainment of goals and ______.

<p>objectives</p> Signup and view all the answers

In economics, ______ refers to anything that has a functional value (usually in money).

<p>wealth</p> Signup and view all the answers

The process of distributing goods and services is known as ______.

<p>distribution</p> Signup and view all the answers

John Maynard Keynes argued that inadequate overall demand could lead to prolonged periods of high ______.

<p>unemployment</p> Signup and view all the answers

The IS-LM model integrates the real IS (investment-saving) and monetary ______ (demand for, and supply for money).

<p>LM</p> Signup and view all the answers

Positive economics uses objective or scientific explanation to analyze different ______ in the economy.

<p>transactions</p> Signup and view all the answers

Normative economics is concerned with human ______ and deals with ethics and personal value judgments.

<p>welfare</p> Signup and view all the answers

An economy must identify what are the commodities needed to be produced for the ______ of society.

<p>utilization</p> Signup and view all the answers

There is a need to identify the different methods and techniques in order to produce ______.

<p>commodities</p> Signup and view all the answers

Labor intensive production uses more of the human ______ or manual labor in producing goods.

<p>resource</p> Signup and view all the answers

Normative economics answers the question ‘what ______ be’ regarding economic policies.

<p>should</p> Signup and view all the answers

Capital intensive production employs more technology and capital goods like machineries and equipment than ______ resources.

<p>labor</p> Signup and view all the answers

Underproduction results in a failure to meet the needs and wants of ______.

<p>society</p> Signup and view all the answers

Overproduction results in excess goods and services going to ______.

<p>waste</p> Signup and view all the answers

The study of ______ is important in understanding the behavior of economic subjects in society.

<p>sociology</p> Signup and view all the answers

An understanding of economics helps individuals to be wise ______ by informing them about economic policies.

<p>voters</p> Signup and view all the answers

Economics seeks to analyze transactions made by society and its members, particularly regarding their behavior and decision ______.

<p>making</p> Signup and view all the answers

Money and finance are considered ______ in the study of economics.

<p>important</p> Signup and view all the answers

Economics explains the internal operation and trade policies of countries and measures their ______ advantage.

<p>comparative</p> Signup and view all the answers

Study Notes

Learning Objectives of Economics

  • Defines economics as the management of scarce resources to meet unlimited human needs and wants.
  • Identifies core problems in economics related to scarcity and resource allocation.
  • Emphasizes a scientific approach to economics, utilizing models and theories for analysis.

Key Terms in Economics

  • Needs vs Wants: Needs are essential for survival while wants are desires that enhance quality of life.
  • Resources: Classified into four categories - land (natural resources), labor (human effort), capital (man-made production goods), and entrepreneurship (individuals who combine resources to create goods/services.
  • Scarcity: Limited availability of resources relative to society's infinite demand for goods and services.

Division of Economics

  • Microeconomics: Focuses on individual consumers and firms, analyzing price systems and specific market behaviors.
  • Macroeconomics: Studies the economy as a whole, examining aggregates like total income, output, employment, spending, and price levels.

Historical Background of Economic Theory

  • Adam Smith (1723-1790): Regarded as the "Father of Economics"; authored "Wealth of Nations", which promotes demand and supply dynamics through the concept of the "invisible hand".
  • John Stuart Mill & David Ricardo: Contributed to political economy and comparative advantage theories, emphasizing state roles in economic contexts.
  • Karl Marx (1818-1883): Argued that labor is central to production and that workers drive economic value.
  • John Maynard Keynes (1883-1946): Proposed that insufficient demand can lead to unemployment, advocating for government intervention.

Important Concepts in Economic Analysis

  • Ceteris Paribus: Assumes all other factors are held constant to analyze the relationship between specific economic variables.
  • Positive vs Normative Economics:
    • Positive economics examines economic conditions as they are, utilizing objective analysis.
    • Normative economics assesses what economic conditions should be, incorporating value judgments and ethical considerations.

Fundamental Economic Questions

  • Identifies four central questions: What to produce? How to produce? How much to produce? For whom to produce?
  • Examines production methods:
    • Labor-intensive (relying on human resources)
    • Capital-intensive (using technology and machinery).
  • Addresses potential issues of underproduction (failure to meet demand) and overproduction (excess goods wasting resources).

Relationship of Economics to Other Sciences

  • Business Management: Connects through employment opportunities and economic balance.
  • History: Provides insights into past economic theories and their relevance to current issues.
  • Finance: Vital in studying monetary aspects of economics.
  • Physics, Sociology, Psychology: All influence economic systems, consumer behavior, and microeconomic analysis.

Importance of Studying Economics

  • Enhances understanding of societal behaviors and decision-making processes.
  • Provides insights into global affairs, trade policies, and national competitiveness.
  • Empowers individuals to make informed voting decisions regarding economic policies.

Three E's of Economics

  • Efficiency: Focuses on optimal allocation of resources and enhancing productivity, measurable in both technological and economic terms.
  • Equity: Addresses principles of fairness and justice in resource distribution, examining the impact of advancements on employment.
  • Effectiveness: Pertains to achieving economic goals and objectives, serving as a tool across various fields.

Key Economic Terms

  • Wealth: Anything with functional value, often measured in monetary terms.
  • Consumption: The use of goods and services by households.
  • Production: The process of creating goods and services.
  • Exchange: The act of trading goods or services between parties.
  • Distribution: How produced goods and services are allocated among consumers.

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CHAPTER 1_ ECONOMICS1.pptx

Description

This quiz explores the foundational concepts of economics, including the definition of economics, the scientific approach, and key terms like needs, wants, and resources. It also delves into economic models and theories essential for understanding economic problems and decision-making. Test your knowledge and understanding of these vital economic principles.

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