01 Introduction to Applied Economics

Cards (53)

  • The word economics came from oikanomia or oikonomus
  • oikanomia or oikonomus, a Greek word meaning household management or management of the household.
  • The definitions of economics are as follows:
    1. It is the study of what constitutes rational human behavior in the endeavor to fulfill needs and wants or the study that attempts to explain how an economy operates and how the consumer attempts to maximize his/her wants within limited needs.
    2. It studies how people use scarce resources to satisfy their unlimited wants.
    3. It is the efficient allocation of scarce means of production toward satisfying human needs and wants and the science that deals with managing scarce resources.
  • THE THREE (3) E'S OF ECONOMICS:
    • Efficiency
    • Effectiveness
    • Equity
  • Efficiency. It is the productivity and proper allocation of economic resources and the relationship between scarce factor input and output of goods and services
  • Effectiveness. It is the attainment of goals and objectives.
  • Equity. It refers to justice and fairness.
  • Social Science is the study or discipline that aims to explain human behavior.
  • Economics is a social science because it studies human behavior and how people make decisions to satisfy their unlimited wants by allocating limited resources.
  • TWO (2) BRANCHES OF ECONOMICS:
    • Macroeconomics
    • Microeconomics
  • Macroeconomics - It is the study of the economic behavior of the economy as a whole, especially the national economy.
  • Macroeconomics - It is known as the analysis of employment and income.
  • Microeconomics - It is the study of economic behavior in particular markets, such as the market for computers or unskilled labor.
  • BASIC DECISION PROBLEMS:
    1. Consumption
    2. Production
    3. Distribution
    4. Growth over Time
  • Consumption. It is a problem that people have to deal with in their day-to-day activities
  • Production. Producers are generally concerned about the production of goods and services
  • Distribution. The government primarily addresses it. There must be an appropriate allocation of all resources benefiting all members of society
  • Growth over Time. As societies grow in number, they continue to live on. The problems of choice, consumption, production, and distribution must be perceived in the context of how they will affect future events
  • TOOLS OF ECONOMICS:
    1. Logic
    2. Mathematics
    3. Statistics
  • Logic is a science that deals with sound thinking and reasoning. Facts and evidence should be provided; otherwise, uncertainty will cloud the logic.
  • Economic/production resources are the resources or inputs used to produce the goods and services that people want.
  • Land is categorized as fixed resources – finite, exhaustible, and depletable. It is all that nature freely provides. Rent serves as payment to landowners
  • Labor is the exerted effort of individuals when producing goods and services
  • labor is also known as human resources
  • Human capital comprises all able-bodied people capable of working in the nation's economy and offering other individuals or businesses different services
  • Capital is the man-made goods (resources) used when producing other goods and services
  • Monetary resources move a nation's economy as people purchase and sell resources to people and businesses
  • Savings is part of the person or economy's income, not spent on consumption
  • Entrepreneurship is an economic activity that might earn the entrepreneur a profit or incur a loss
  • Foreign Exchange is the dollar and the dollar reserves that the economy has
  • Scarcity is a condition facing all societies because insufficient productive resources satisfy people's unlimited wants
  • Opportunity cost is the value of the best-foregone alternative or what is given up when one chooses
  • the phrase There is no such thing as a free lunch (TINSTAAFL) explains the notion of opportunity costs.
  • Positive Economics is an economic analysis that considers economic conditions 'as they are' or considers economics 'as it is'.
  • Normative Economics is an economic analysis that judges economic conditions 'as these should be'.
  • Ceteris Paribus, a Greek term meaning all other things held constant or all else equal, is an assumption used in analyzing the relationship between two variables as the other factors are unchanged
  • Applied Science deals with applying scientific knowledge to problems to develop practical solutions
  • Applied Economics is the study of economics relative to real-life situations by observing how theories work in practice
  • Applied Economics is the application of economic theory and econometrics in specific settings to analyze potential outcomes
  • Economic Theory (Economic Model) simplifies economic reality used to make predictions about the real world