The Nature of Economics
Terms
undefined, object
copy deck
- Labour
- Human resources - include qualities boosted by education, training & experience
- Land
- All natural resources. Incl land, space above & airways, the sea, mineral wealth
- Capital
- Any man-made resource - incl. buildings, plant , machinery, equipment & tools.
- Financial capital
- Money
- Capitalist economies
- Society where private ownership of capital occurs
- Ongoing process of adding to stock of capital
- Investment
- Enterprise
- ecnomic resource as shown by entrpreneurs
- Economic resources (4)
- Labour, Land, Capital, Enterprise
- Return to owner from labour
- Wages
- Return to owner from land
- Economic rent
- Return to owner from capital
- Profit/Interest
- Return to owner from enterprise
- profit
- Scarcity
- the lack of resources to meet society's demands upon them
- Opportunity cost
- the sacrifice of the next best, or most rewarding alternative, use of a resource.
- Free market system
- Where all resources are privately owned and those goods & resources are distributed according to their prices, which effectivelt rations them.
- What did Adam Smith, in Wealth of Nations (1776), describe with regards to the free market mechanism?
- the 'invisible hand' which caused individual decisions to operate for the economic advantage of society.
- Central planning system or command economy
- ..concentrates the decision-making process and the organisation of resources to a central authority.
- Georgist system - Henry George's two main questions.
-
1) Why poverty exists in resource-rich economies.
2) Why resource-rich economies slide into cyclical depression. - Basis of Georgist system
- 100% taxation of the annaul rental value of land combined with a corresponding reduction in taxes on the returns of both capital & labour.
- Definition of mixed economies
- Exist where elements of the free market & central planning systems are combined to varying degrees.
- Positive statements
-
Can be tested for proof with reference to factual information.
'is' - Normative statements
-
Are subjective value judgements
'should' - Microeconomics
- Study of of small-scale elements of economies - consumers, firms, resource owners, industry markets.
- Macroeconomics
- Study of large-scale elements of the economic system and between national economies.
- Economic problems are caused by...
- ...scarcity of resources.
- Economic choices involve...
- ...opportunity cost.
- Arbitrage
- trading activity based on buying where a product is cheap and selling where it has a higher price.
- Distortions
- outcomes in economy that prevent market forces giving the best outcome.
- Externalities
- costs or benefits of an economic activity that fall on people not directly involved.
- Incentives
- what drives people to make the choices they do.