Economics Test 1 Flashcards Glossary Terms

Terms

undefined, object
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whatever one does better than others
"something that A (one person or country) does better than B (another person or country) relative to everything else that A does
* * *
you do what you do best compared to everything else you do.
* * *
our most enduring economic theory; started at beginning of modern/classic economics and drives all the models"
"Hypothesis: division of labor ïƒ  (leads to) specialization ïƒ  increasing returns. â€œEvery individual and every nation should do what they do best.â€
Adam Smith (1723-1790) Scotland one of the most important theories from Wealth of Nations; it does not mean more output.
Conceptualized earlier by
Mencius (372-289 BC)"
anti-prosperity & pro-prosperity tenets
Pro-prosperity tenet = a maxim or life principle, if followed, that would result in material well-being. The opposite of anti-prosperity tenet that would have detrimental economic consequences.
a priori (Latin)
At the outset; that which exists prior to examination.
archaist
"someone who studies or praises the past, or whose intellectual perspective and values are shaped by reverence for the past
* * *
Confucius & Plato were archaists"
arithmetic progression & geometric progression
"arithmetic progression =a series of numbers increasing at a decreasing rate, i.e., 1, 2, 3, 4.
* * *
geometric progression = a series of numbers increasing at a constant rate; e.g., 1, 2, 4, 8"
rate of increase
"the percentage change between 2 numbers
* * *
take the 1st number from the 2nd number, divide the difference by the 1st number, and multiply the quotient by 100.
E.g., the rate of increase from 4 to 5 is 25%; i.e., 5-4 = 1, 1÷4 = .25 = 25%
"
asymptote
a function which continuously approaches a line or axis without meeting it at any finite distance; e.g., an indifference curve or average fixed cost function. Technically, a tangent at infinity.
***
not asymptotic, what happens if you get scared half-to-death â€“ twice
average costs (AC)
total costs (TC) divided by the number of units produced (q)
bullionists
an English mercantilist; derived from the British use of small gold bars called bullion
Colbertist
a French mercantilist; the word reflects the enormous power and influence of Jean Colbert (1619-1683), Finance Minister to Louis XIV
mercantilism
the economic philosophy based on the premise that precious metal is wealth. Dominant during the 16th, 17th & 18th centuries, mercantilist governments increased their gold holdings by restricting imports and subsidizing export industries.
capital
in economics, a good (e.g., machine, truck, warehouse, etc.) used by the business sector to produce another good.
factors of production
"Land (T)
Labor (L)
and
Capital (K)
are the classical factors.
Land and labor are the primary factors; they exist a priori (at the outset).
Capital is the secondary factor; it is produced by land and labor. "
capitalism
a legal system that safeguards private property and permits free enterprise without government interference
ceteris paribus (Latin)
all else remains constant. examining the changes in two or three variable while assuming that all other variables do not change.
Classical economics
the doctrines (theories) and paradigms (models) developed from 1752 through 1867 that formed an academic discipline originally called â€œpolitical economics.â€ The founders, called Ricardians,â€ promoted free trade as their universal tenet and believed the concept of price was explained by the labor theory of value.
labor theory of value
David Ricardoâ€™s (1772-1823) theory that the value of an output is equal to the sum of the value of the labor inputs
classical rent doctrine
David Ricardoâ€™s theory that surplus value is captured by the landlord
communism
the liberation of the people from the burdens of liberty
Concave vs. convex
a description of a curvilinear function as per its relationship to a point of reference. â€œcavesâ€ over a point of reference, â€œvexesâ€ away from point o reference. If no specific point is given, the origin (0,0) is assumed to be referenced.
constant costs
marginal costs per unit that remain the same regardless of the number of units produced
consumption good vs. investment good
"consumption good = a good or service used by the household sector

investment good = capital; a good or service used by the business sector"
"cycle = a succession of periodically recurring events
* * *
business cycle = variations above and below the trend line of an economy or the price of a stock, with periods measured from trough to trough. Economists have identified major cycles of 50 years; (Nikolai Kondratieff) 20 years (Karl Marx) and 4 years (Roy Harrod & Evsey Domar)"
Deductive logic
"reasoning from the general to the particular
* * *
the use of an internally consistent hypothesis.
If A then B.
* * *
â€œIf it is raining everywhere in S. Calif, it is my conclusion that itâ€™s raining in Irvine.â€ It does not require external examination.
* * *
Aristotleâ€™s methodology"
Inductive logic
"reasoning from the particular to the general; the logic of empiricism; extrapolating the future from the experience of the past
* * *
Platoâ€™s methodology
* * *
We want to know what weâ€™ve done so we can predict the future.
* * *
Weakness: The fallacy of composition. Assuming what is true for the part is true for the whole. E.g., six blind men examining an elephant, each assumed the small area they felt represented the entire elephant."
methodology
principles of orderly thought; a logic system or thought process
method
a way, system, or procedure for doing anything
dialectic
"Platoâ€™s system of inductive logic that begins with a thesis (an initial assumption of reality) tempered by an antitheses (an observed exception) to form a synthesis (the new thesis)
* * *
thesis; antitheses; synthesis, never-ending"
Dialectical materialism
"Marxian application of Hegelian logic (which comes from Platoâ€™s dialectic) to the study of economic history
* * *
Marx is the greatest student of Hegel."
Hegelian logic
"George Wilhem Friedrich Hegelâ€™s application of Platoâ€™s dialectics (thesis, antithesis, synthesis) to the study of history.
* * *
Hegel resurrect Plato 1,000 years after Aristotle tried to buried him"
Distribution theory
a model that explains for whom the economy produces
distribution theory: Marxism
a system that distributes wealth according to need
distribution theory: feudalism
distribution based on birthright
distribution theory: meritocracy
a system that distributes wealth to those who contribute that which is most scarce
dynamics
an analysis which considers all significant variables over a time series
statics / Static Analysis
an analysis that considers a limited number of variables and time frames
Economic good
a good (tangible product) or service (intangible commodity)
economic good vs free good
Carl Mengerâ€™s distinction between a good which is scarce (an economic good) and therefore commands a price, and one that is not scarce and therefore is free.
economic growth and economic development
"as defined by Joseph Alois Schumpeter, economic growth = more
* * *
as opposed to economic development which means change.
* * *
Economic development is the result of entrepreneurial innovation."
hard vs. soft science
"an academic discipline is considered hard or soft as a reflection of the degree to which mathematics is used to describe or teach the subject matter
* * *
hard = physics, engineering
soft = philosophy, foreign language"
Economic history
"the study of history in terms of economic causes and effects
history of economic thought
the study of the development of economic principles and analysis
economist
"some one who:
1. does it with models
2. gets rich explaining why others are poor
3. sees something work in practice and asks if it would work in theory."
economic rent & quasi rent
"economic rent = a payment to a factor of production
quasi rent = a premium in excess of economic rent paid to a factor of production which is experience abnormal scarcity"
economics
"1. the study of scarcity
2. the study of natural laws to learn peopleâ€™s behaviors to get their money
3. the metaphysics of accounting
4. a counter-intuitive thought process for comprehending social order"
economists
"1. a large group of academics, if laid end to end, would not reach a conclusion.
Economy vs efficiency
"to economize is to minimize inputs with the given output; e.g. make the same number of units coming off a production line at lower cost
* * *
to make efficient is to maximize the output with the given inputs; e.g., make more units coming off the production line at the same cost
* * *
these two terms are absolute opposite in terms of production"
Eminent domain
the right or power of the state to take private property for public use, usually for adequate compensation
empiricism
extrapolation of the future from the past; the logic of experience
Eurodollar
U.S. dollars on deposit at a European bank or banks in the British Caribbean
external economy vs external diseconomy
"o external economy â€“ an autonomous (independent economic activity with beneficial spreading effects
o external diseconomy â€“ if the effects are detrimental
* * *
E.g. In the world of aerospace, if you work in the company, you are part of the internal economy. Everyone else benefits from the aerospace company even thought they have no direct association, i.e., an external economy."
external tariff & internal tariff
"external = a tax on imports or a customs duty on goods imported into an economic area or business zone from states or political entities not members of that area
* * *
internal = between members of an economic area"
Location theory
The subject in economics that considers where to produce. A site may be selected because it is near the factors of production, the market, or for some other rationale
factor-oriented industry
"A business that reduces cost by locating near a factor of production
* * *
eg., highly skilled labor (e.g. artificial intelligence would be located in Silicone Valley), specialized land use, or an exceptionally heavy input."
"A business that reduces cost by locating near a factor of production
* * *
eg., highly skilled labor (e.g. artificial intelligence would be located in Silicone Valley), specialized land use, or an exceptionally heavy input."
weight-subtracting (reducing) industry
"a business with an output that weighs significantly less than the raw materials used to manufacture it
* * *
what comes in weights millions of tons, what goes out weighs thousands of tons
* * *
e.g. a steel mill, youâ€™d want to put as close to the iron ore/coal as possible to reduce the cost of shipping and production"
market-oriented (point-of-sale) industry
"o a business that locates near the customer to:
â€“ beat the competition,
â€“ to reduce distribution cost, such as tariffs (taxes on imports; i.e., a customs duty, as in the case of foreign car manufacturers building in the U.S.
o E.g.â€“ restaurant rows / furniture rows, caused by natural law, going where the business is."
footloose (miscellaneous) industry
"o a business that is located without regard to the factors of production or market, but rather to some other rational such as:
â€“ weather (some companies relocate to the Sun Belt)
â€“ quality of community, or
â€“ state law, e.g. attractive tax laws in the state of Delaware
futurist
"someone who creates a paradigm to predict the future or whose intellectual perspective and values are shaped by respect for the future.
* * *
Aristotle was a futurist"
"GDP gross domestic product & GNP gross national product"
"o â€œThe total dollar value of all new goods and services sold during a fiscal year which were produced â€¦â€
o gross domestic product (GDP) â€“ â€¦ â€œwithin the geographic borders of a country regardless of the nationality of the producers.â€
o gross national product (GNP) â€“ â€¦ â€œby a nationâ€™s permanent residents regardless of where they produced it.â€

o Selling a used car does not count, as it is not a newly produced item; itâ€™s just a change of assets; A sand castle built on the beach could be part of the GNP if its sold to someone."
gestalt
the whole, where the whole is greater than the sum of its parts
hedonism
Aristotle set forth this natural law: All men seek pleasure to avoid pain
hypothesis
In logic, a conditional proposition, i.e., an assumption or set of assumptions provisionally accepted as a basis for reasoning or argument. It may be internally consistent, as in a syllogism. It may be experimental, as in a scientific proposition advanced as possibly true.
inflection point
the point on a function where the course changes from clockwise (cw) to counterclockwise (ccw), or visa versa. A point on a function formed by the tangency of two arcs.
input
a factor of production
Invisible Hand Doctrine
"Adam Smithâ€™s principle that: â€œEvery individual endeavors to employ his capital so that its produce may be of greatest value. He generally neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own security, only his own gain. And he is in this led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interests, he frequently promotes that of society more effectually than when he really intends to promote it.
* * *
i.e., Man will do more good for society trying to get rich than he ever will trying to be a do-gooder"
Wealth of Nations
(An Inquiry into the Nature and Causes of the â€¦ ) Adam Smithâ€™s magnum opus that debunks mercantilism and sets forth the principles of free trade using the Invisible Hand Doctrine as the theoretical framework.
"Adam Smithâ€™s conundrum that asks why diamonds, a luxury, are worth more than water, which is essential to life.
* * *
What is a price?"
widget
an undefined good or service
work
something people look for until they find a job
variable cost (VC)
a cost that is zero at zero production and increases as production increases.
usury
the practice of charging an exorbitant or illegal rate of interest
total cost (TC)
"fixed cost (FC) plus variable cost (VC)
TC = FC +VC"
total revenue (TR)
price times quantity
total utility (TU)
the total satisfaction derived from all units consumed
marginal utility (MU, TUâ€™)
the change in total utility caused by the consumption of one additional unit; the slope of TU
marginal revenue (MR, TRâ€™)
the change in total revenue caused by the sale of one additional unit, the slope of TR
marginal physical product (MPP)
"extra output
* * *
the difference in the number of units produced this time compared to last time"
marginality
"the concept of slope or differential calculus
* * *
the marginal function
* * *
the first derivative
* * *
y prime (yâ€™)
* * *
rise over run"
marginal cost (MC, TCâ€™)
the change in total cost caused by the production of one additional unit
megaeconomics
the study of the comings and goings of civilizations, empires, and cultures.
macroeconomics
the study of an economic system as a whole, i.e., national income analysis.
laissez faire (French)
"let it be
* * *
leave government hands off commerce"
Natural law
"a rule of conduct inherent in manâ€™s nature and discoverable by reason alone. A law of social science
* * *
what people do naturally by their own initiation"
Conditions: necessary sufficient
"ï‚§ conditions = Special class of assumptions
ï‚§ necessary condition
ï‚§ Essential requirement for specific outcome.
ï‚§ E.g. you have to put gas in the car for it to drive. It may not drive, but gas is necessary.
ï‚§ You need 93% to get an A, one of the requirements.
ï‚§ sufficient condition
ï‚§ Guarantees the outcome.
ï‚§ E.g., pushing the car over a cliff guarantees that itâ€™s going. The gas in no longer a consideration.
ï‚§ If you walk in class and get 100% on the final, regardless of never attending a previous class, you get an A."
scarcity
any condition that causes a good or service to command a market price
Ricardians
the classical economists
service
an intangible commodity, deed, or utility
syllogism
"An internally consistent hypothesis.
* * *
The deductive logic of Aristotle commonly referred to as set theory"
Tabula rasa (Latin)
"a clean slate
* * *
without a preconceived notion"
Theoretical framework
"the boughs on which an author hangs the foliage of his thesis
* * *
as Adam Smith did with the Invisible Hand Doctrine for Wealth of Nations"
Supply curve
a horizontal aggregation of marginal cost functions beyond the point of diminishing returns for all member firms in a market
real transfer vs money transfer
"real refers to the good or service in a transaction, as opposed to
* * *
money which is the payment for that good or service
* * *
the recipient of the real transfer is the initial beneficiary of a trade"
Normative ambiguity
"two tenets (maxims or principles) of social behavior that suggest counter-directional outcomes when applied arbitrarily to the same set of circumstances
(select one to know one for the exam)"
Opportunity cost
"The profit that is not made in the best opportunity foregone.
* * *
Itâ€™s the best thing you didnâ€™t do"
output
a good or service ready for sale
monetize
"to tie or connect a commodity to money; e.g. a precious metal is monetized when stored (hoarded) to support a currency."
microeconomics
the study of individual markets, prices, and firms
metaphysics
"the branch of philosophy which examines the ultimate existence of things
* * *
what is beyond (Greek: meta = after) physics.
* * *
Medieval scholars believed that the essentials of a composite entity were earth, air, fire and water. Beyond these, the concept of life is explained by the quintessence, or 5th element."
quid pro quo (Latin)
"this for that
something for something"
Production vs productivity
"production is output
e.g., 100 finished widgets
* * *
productivity is output per unit of input
e.g., 20 widgets per worker
* * *
o 2 ways to increase productivity
â€“ 1) efficiency
â€“ 2) economy
â€“ most companies do one or the other, in most cases itâ€™s too difficult to do both at the same time"
production possibilities curve & Pareto optimality
"The frontier line of maximum output possible when all available factors of production are fully employed at their highest and best use; i.e., when all goods and services are produced at the minimum average cost.
* * *
E.g.: Paretoâ€™s optimality function as used by Johnson, Guns/Butter â€“ a clever and direct approach but not directly forthcoming as to where the nation was regarding the Vietnam War.
Pareto optimality â€“ the condition that exists when no one can be made better off without making someone worse off."
physiocracy
"the school of economic thought which holds that agriculture is the source of all real growth, productivity, and wealth.
* * *
Invented by Francois Quesnay
* * *
U.S. is very physiocratic; we feed the world"
Prima facie (Latin)
"at first view
Productivity descriptions
"ï‚§ 6 possible outcomes from a change in production:
â€¢ 1â€“ increasing returns to scale = increasing inputs proportionately
â€¢ 2â€“ constant returns to scale = increasing inputs proportionately
â€¢ 3 â€“ decreasing returns to scale = increasing inputs proportionately
â€¢ 4 â€“ increasing returns to the variable factor = increasing inputs disproportionately
â€¢ 5 â€“ constant returns to the variable factor = increasing inputs disproportionately
â€¢ 6 â€“ decreasing returns to the variable factor = increasing inputs disproportionately (ref diminishing returns)

ï‚§ Output Results can be increasing, decreasing, or constant = 6 possible descriptions of productivity

ï‚§ Any verbal description of productivity should start with one of these 6."
Diminishing returns
"decreasing returns to the variable factor
* * *
does not mean output decreased; it means the change decreased
* * *
the benchmark beyond which you must go as quickly as you can to maximize profit"
private property rights
Exclusive use and transfer. Adam Smith argued that government should restrict its economic activity to the protection of these rights; i.e, by providing an army, police, and judicial enforcement. (this relates to laissez fair: let it be, i.e., leave government hands off commerce )
doctrine
used in economics, especially during the 19th century, as a synonym for theory
* * *
a scientific principle of prediction
fact
the result of research; unfinished, but presently abandoned
law of demand
Alfred Marshallâ€™s law of downward sloping demand; i.e., the quantity demanded increases as the price decreases.
law of diminishing marginal utility
"Carl Mengerâ€™s observation that the amount of extra satisfaction received per unit of consumption decreases as the quantity consumed increases
law of diminishing returns
"Thomas Robert Malthus
When equal increments of a variable input are successively (over & over) added to a fixed input, the extra output (the delta, Î”) will eventually diminish due to unbalanced growth."
point of diminishing returns
The minimum point on the marginal cost function. The inflection point on the total cost or variable cost function. The benchmark beyond which a business must go to maximize profits.
law of substitution
The assumption in ordinal utility theory that the trading value of each unit increases as the number of units decreases.
market
all potential buyers and sellers of a particular good or service
utility
the satisfaction derived from consuming good or service
Surplus value
the difference between the labor value and the market price
iron law of wages
"Karl Marxâ€™s characterization of David Ricardoâ€™s stationary state doctrine that explained why wages ultimately settled at the subsistence level
* * *
we are where we are and we canâ€™t change it
* * *
if wages (per capital income) increase; family fertility rate increases; workforce size would increase; wages would go down; infant mortality rate would go up, etc."
Marginalists (marginal utility school)
"Led by Leon Walras, William Stanley Jevons, and Carl Menger.
* * *
These economists resolved Adam Smithâ€™s water-diamond paradox by examining the relationship between incremental desirability and price (water-diamond paradox)"
Primary factors of production
"Land (T)
Labor (L)"
Capital (K)
Secondary factor of production
entrepreneurship
"4th factor of production (as defined by Joseph Alois Schumpeter) can be pursued in one or more of five ways:
1. Introduction of new products (e.g. Edison)
2. New methods of production (e.g., Ford)
3. Opening new markets (e.g., Russia)
4. Development of productive factors (e.g., General Motors Institute
5. Catalyst of productive factors (e.g. NASA)"
scholastics
The monks of the Dominican and Franciscan orders that recovered and copied the Greek and Roman scholarly works during the revival of learning between the 9th and 14th centuries. Obsessed with metaphysics, these â€œschool of men,â€ led by St. Thomas Aquinas (1225-1274), sought a synthesis between Aristotelian rationalism and Christian dogma.
Market price
"the competitively arrived price of
one good,
in one place,
at one time"
the Ricardian name for market price
"In international economics, the maximum benefit gained by either side of a transaction while the other side neither gains nor loses.
* * *
Part of David Ricardoâ€™s explanation of why the actual trading ratio, called the terms of trade, takes place between these two extremes"
Elasticity (theory)
responsiveness of a dependent variable to a change in the independent variable. In economics, Q = f(P)
Consumer surplus
utility received, but not paid for
Profit theory
any model that explains how a business enterprise maximizes profit
Welfare economics
"the study of public policy from the perspective of consumer benefit
* *
what do you get when you spend your money
* * *
has nothing to do with our
perception of welfare"
Income redistribution
"the result of a change in government policy where one group or sector is made better of by making another group or sector worse off
* * *
e.g. Robin Hood scheme
* * *
Vilfredo Pareto warned us of this in 1909 in terms of how the losers may compensate"
arbitrage
"a simultaneous transaction in two or more markets, buying in the cheap (low price) market and selling in the dear (high price) market
* * *
invented by John Maynard Keynes"
Neoclassical economics
"A synthesis of classical economics and marginal utility theory with the economic doctrines and paradigms developed from 1874 through 1933. Sometimes called the Cambridge school, this body of thought is based chiefly on the equilibrium theory (the law of supply and demand) of Léon Walras (1834-1910) & the work of Alfred Marshall (1842-1924).
* * *
Also called Marshallian economics, in includes the concepts of elasticity, consumer surplus, and profit maximization, and adopts mathematical economics as a method of explanation."
fallacy of composition
"assuming what is true for the part to be true for the whole
* * *
e.g., six blind men â€œseeingâ€ an elephant, each thinks their section represents the whole
* * *
weakness of inductive logic"
Fixed cost (FC)
"a cost that is incurred regardless of the level of production
* * *
even if the output were zero
* * *
the height of the total cost function; i.e. where TC crosses the vertical axis"
FTC/GATT/WTO

General Agreement on Tariffs and Trade

World Trade Organization (formerly GATT before 1955) promotes the reduction of trade restriction s among member nations"
conspicuous consumption
Thorstein Veblenâ€™s thesis that some goods are preferred to others because of their social implications; i.e., that prestige is afforded as a function of price
demand
both the ability and willingness to enter the market at some specific price
demography
the study of populations
equilibrium
price
the price that clears the market, i.e., the price at which the quantity supplied equals the quantity demanded.
* * *
the quintessence of the supply and demand theory
equilibrium theory
Leon Walrusâ€™ synthesis of two disparate mathematical concepts; i.e., supply and demand. Arguably the most important natural law of economic, whether applied to a market (partial equilibrium) or an economy (general equilibrium).
free enterprise
a market that permits free entry and free exit by buyers and sellers
* * *
a market without artificial barriers to trade
General Theory (⬦ of Employment, Interest, and Money)
The foundations of macroeconomic analysis by John Maynard Keynes
general theory of employment
John Maynard Keynesâ€™ explanation that employment is a function of aggregate demand; i.e., consumption, investment, and government expenditures
general theory of relativity
Albert Einsteinâ€™s proposition that space is curved and time slows down near a gravitating mass
height of a function
where a function intersects the y-axis when x=0 (Note F in Primer)
imperialism
the use of force to establish the authority of one nation over another for the extension of its political sphere, the exploitation of raw materials, the development of foreign trade, or genocide
* * *
e.g., 19th century English colonies,
the Soviet Union,
or Chinese hegemony over Tibet
innovation
as opposed to invention, innovation is defined by its impact on the market.
* * *
more than a mere improvement of present methods, an innovation is a significant step forward in technology, management, or product development
Marshallian economists
the neo-classical economist who developed the modes and theories of modern market economics
mathematical
economics
the use of graphs and mathematical symbols to express and explain economic principles
MPP
extra output
the difference between the current output and the previous output
(literally, marginal physical product)
necessity
in economics, a good for which the elasticity of demand is less than one
luxury
in economics, a good for which the elasticity of demand is greater than one
profit maximization point
where marginal cost (MC)
equals
marginal revenue (MR)
returns to scale
a production theory term used to indicate that all inputs have been increased proportionately;
i.e.,
by the same percentage
returns to the variable factor
a production theory term used to indicate that the factors of production have been increased disproportionately;
i.e.,
that at least one input has been increased while at least one output has remained fixed.
subsidy
a unilateral transfer payment from the government to the business sector
welfare
a unilateral transfer payment from the government to the household sector
tautology
in logic, a statement that is necessarily true by the virtue of its structure, e.g., either you have an MBA or you donâ€™t
theory of the firm
Alfred Marshallâ€™s profit theory; i.e., an explanation of how a business maximizes profit
unilateral transfer payment
a payment for which there is no return for good or service (welfare, subsidy)
Gross Domestic Product (GDP)
â€œThe total dollar value of all new goods and services sold during a fiscal year which were produced within the geographic borders of a country regardless of the nationality of the producers.â€
Gross National Product (GNP)
â€œThe total dollar value of all new goods and services sold during a fiscal year which were produced by a nationâ€™s permanent residents regardless of where they produced it.â€
economize
to minimize inputs with the given output; e.g. make the same number of units coming off a production line at lower cost
efficiency
to maximize the output with the given inputs; e.g., make more units coming off the production line at the same cost
economic rent
a payment to a factor of production
quasi rent
a premium in excess of economic rent paid to a factor of production which is experience abnormal scarcity
Pro-prosperity tenet
a maxim or life principle, if followed, that would result in material well-being.
Anti-prosperity tenet
tenet that would have detrimental economic consequences
Production
Output
Productivity
Output per unit of input
â€“ 1) efficiency
â€“ 2) economy
â€“ most companies do one or the other, in most cases itâ€™s too difficult to do both at the same time"
2 ways to increase productivity
Theory
A prediction that can speak to the past as well as the future; The ultimate test of a theory: It predicts well.

e.g., Dr. G. throwing chair through the window, during an earthquake and elephant charging all at the same moment. Never mind the applicability. If they all happen, itâ€™s virtually 100% guaranteed that the window will break. Thatâ€™s a good theory.

Three assumptions in one model. If any one of the them occur, the theory predicts correctly.
External Tarrif
"a tax on imports or a customs duty on goods imported into an economic area or business zone from states or political entities not members of that area"
Internal Tarrif
A tarrif between members of an economic area
Consumption good
"A good or service used by the household sector"
Investment good
"Capital; a good or service used by the business sector"
External economy
"An autonomous (independent economic activity with beneficial spreading effects"
External diseconomy
"an autonomous (independent) economic activity with detrimental spreading effects"
Cycle
A succession of periodically recurring events.
"variations above and below the trend line of an economy or the price of a stock, with periods measured from trough to trough. Economists have identified major cycles of 50 years; (Nikolai Kondratieff) 20 years (Karl Marx) and 4 years (Roy Harrod & Evsey Domar)"
arithmetic progression
a series of numbers increasing at a decreasing rate, i.e., 1, 2, 3, 4.
geometric progression
a series of numbers increasing at a constant rate; e.g., 1, 2, 4, 8
Necessary condition
Essential requirement for specific outcome.

E.g. you have to put gas in the car for it to drive. It may not drive, but gas is necessary.
ï‚§ You need 93% to get an A, one of the requirements.
Sufficient condition
Guarantees the outcome.
ï‚§ E.g., pushing the car over a cliff guarantees that itâ€™s going. The gas in no longer a consideration.

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