ECON DEV

• Scarcity refers to the limited availability of resources, leading to the need to choose among competing uses for society's resources
• Production possibilities show the maximum amounts of two different goods that can be produced using society's scarce resources
• Opportunity Cost is the best alternative forgone to produce or consume something else
• Unemployment occurs when some resources may go unused and rarely produce to their full potential
• Economic Growth may occur with an increase in the quality or quantity of society's resources or the development of new technologies
• In a market-based economy, distribution and production choices are primarily based on prices determined by demand and supply
• Demand is the willingness and ability of people to buy goods or services at different prices
• Law of Demand states that when the price goes up, quantity demanded goes down, and vice versa
• Supply is the quantity of a good or service that producers are willing to supply at different prices
• Law of Supply states that if the price goes up, the quantity supplied goes up, and if the price goes down, the quantity supplied goes down
• Factors that cause real-world demand curves to shift include changes in the number of consumers, tastes, prices of complements and substitutes, incomes, and expectations
• Factors that cause real-world supply curves to shift include changes in the number of sellers, prices of resources, technology, prices of other products, government taxes or subsidies, and sellers' expectations
• Market failures point to ways the government may intervene in the marketplace to ensure all societal needs are met
• Public Goods and Services have unique characteristics that make it unlikely for the market to provide enough of them, leading to government provision
• Spillovers occur when costs or benefits related to production or consumption affect those not directly involved, like pollution
• Inequity refers to the unfair inability of low-income individuals to meet their basic needs
• Market Power arises when a single supplier or a price-fixing group can influence market prices, potentially leading to unreasonable prices
• Instability in a market economy can lead to fluctuations in employment levels and prices, requiring government intervention for stability
• Development Economics applies economic tools to analyze and address the challenges faced by developing countries
• Economic Development is broader than economic growth, encompassing social and humanitarian achievements, income distribution, and per-capita income
• Gross Domestic Product (GDP) and Gross National Product (GNP) are used to measure a nation's income or production
• The Human Development Index (HDI) combines per-capita income, life expectancy, and educational attainment to measure development
• Healthy Life Expectancy measures the expected number of years to be lived in full health
• Green GNP is a recent approach developed to address environmental concerns in economic measurement
• Green GNP is an informal name given to national income measures adjusted to consider the depletion of natural resources and environmental degradation
• Adjustments made to standard GNP for Green GNP include the cost of exploiting natural resources and valuing the social cost of pollution emissions
• Two methods for making comparisons between countries are the Exchange Rate Method and the Purchasing Power Parity (PPP) Method
• Exchange Rate Method:

  • Uses the exchange rate between the local currency and the US dollar to convert the currency into its US dollar equivalent
  • Values a country's GDP and GDP per capita in US dollars
• PPP Method:

  • Develops a cost index for comparable baskets of consumption goods in the local currency and compares it with prices in the United States
  • Defines a country's PPP as the number of units of the country's currency required to buy the same amount of goods and services that a dollar would buy in the United States
• Output is derived by combining factors of production like land, capital, and labor
• The production function relates inputs of the production process (labor and capital) to the output/income
• The law of diminishing returns governs the growth process, where there are diminishing returns to capital as each worker acquires more capital
• Embodied technical progress involves upgrading the skills of the labor force and educating the young, while technological developments increase the productivity of capital
• Disembodied technical progress includes advances in management and industrial organization that increase output even with fixed labor and capital inputs
• Total Factor Productivity (TFP) pertains to the efficiency with which inputs are combined to produce output
• The production function can be expressed as Y = f(K, L, A), where A represents total factor productivity
• Economic efficiency is boosted when firms move from inside the production possibility frontier, leading to static efficiency
• Improvements in economic efficiency can occur through better management, organization, inventory control, and relations between management and labor
• Technical progress includes embodied technical progress related to changing inputs and disembodied technical progress related to how factors are combined in the workplace
• It is hard to estimate the capital stock accurately as investment figures are typically relied upon, which are measured in a monetary unit and do not reflect the amount of new innovation or technology in the capital