Questions and Answers
A social science that studies the production distribution and consumption of goods and services
Economics
Economics comes from the greek word ______ that translates to "household management"
It deals with the behavior of the economy as a whole
Macroeconomics
Deals with the behavior of individual components as an economic agent.
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Consumer's desire
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Given quantity of a good or service consumer would choose to buy at a particular price
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Consumer will switch to substitute other goods that can be used in its place
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Price of goods rises and income remains the same
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A tabular representation of goods
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A graph showing the quantities of good that consumers would buy at a different prices
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Number of products that a seller is willing and capable to provide to buyers
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The negative or inverse relationship between price and quantity demanded
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The positive and direct relationship between price and quantity supplied
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A given quantity of good or service seller would choose to sell at a particular price
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List of various quantities the seller would choose to sell at a various market prices.
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Graph that shows the relationship between the price of a product and the amount of a product supplied during a period of time
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A situation in which the quantity demanded is greater than the quantity supplied
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A situation in which the quantity supplied is greater than the quantity demanded
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A situation in which two sides of the market balance each other
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The price at which the quantity demanded equals the quantity supplied
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Quantity bought and sold at the equilibrium price
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The process wherein a company/ country decides to focus their labor on a specific type of production
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Economic concept that is used to refer to a party's production capability
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An economist ability to produce a particular good or services at a lower opportunity cost than its trading partners
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The situation where two or more parties depend upon each other for the exchange of goods and the fulfillment of their necessities
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Externality occurs when a decision or action affects people who are not directly involved in the transaction of the leading to inefficiencies
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Importance is a concept that is fundamental in understanding how individuals firms and governments make choices and allocate resources
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Inside the economies tool kit are not a collection of models sets of ideas and theories
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Economics is not a discipline that studies how individuals, businesses and governments make decision regarding the allocation of resources
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Abstraction in economics is the process of removing unnecessary details from the situation to focus on the essential elements that matter
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Abstraction won't allow us to create general ideas of what the problem is and how to solve it
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An economic theory is a set of ideas about the economy that has been organized in a logical framework
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According to _____ an economic theory is a statement of relationship among economic variables
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Economic models are mathematical or logical statement of economic theory
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Visual models are pictures of an abstract economy graphs with curves and lines that tell an economic story
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Study Notes
Overview of Economics
- Economics studies the production, distribution, and consumption of goods and services.
- Originates from the Greek word “oikonomia,” meaning "household management."
- Analyzes behaviors at both the macroeconomic (whole economy) and microeconomic (individual components) levels.
Consumer Behavior
- Consumer's desire indicates the quantity of goods/services they prefer at specific prices.
- Substitution effect: as the price of goods increases while income remains constant, consumers tend to switch to substitute goods.
Market Dynamics
- Supply refers to the number of products a seller is willing and able to provide.
- Demand is influenced by a negative relationship between price and quantity demanded.
- Supply shows a positive relationship between price and quantity supplied.
- Equilibrium price is where quantity demanded equals quantity supplied, determining the price at which transaction occurs.
Pricing and Supply
- Demand table lists various quantities consumers would buy at different prices.
- Supply table outlines quantities sellers would sell at varying market prices.
- Surplus occurs when quantity supplied exceeds quantity demanded.
- Shortage arises when quantity demanded surpasses quantity supplied.
- Equilibrium is the state where supply equals demand.
Specialization and Economic Capability
- Specialization occurs when entities focus labor on specific production areas.
- Comparative advantage allows parties to produce goods/services at lower opportunity costs compared to others.
- Economic interdependence exists when parties rely on one another for goods exchange and fulfilling needs.
Externalities and Decision-Making
- An externality affects individuals not directly involved in transactions, resulting in potential inefficiencies.
- Understanding economics is crucial for decision-making in individuals, firms, and governments regarding resource allocation.
Economic Tools and Concepts
- The economy's toolkit includes models, ideas, and theories for analyzing economic behavior.
- Abstraction in economics involves simplifying complex situations to focus on key elements.
- Economic theories systematically organize ideas about relationships among economic variables.
Models in Economics
- Economic models represent theoretical concepts mathematically or logically.
- Visual models depict abstract economic concepts through graphs and curves to communicate economic narratives.
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