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ECON1311
Ali Dia Alqudaihy
201201872
Section 103
Chapter 1
Scarcity: Some production is limited in specific economy for a country
For example, if oil was scarcity in Saudi Arabia, that will effect the States’ economy
Efficiency: The complete opposition with the word “ scarcity” which means quantities is
high such as oil in Saudi Arabia; it has the most oil all over the world, and that is why
they have a good economy.
Free goods= efficiency | the prices will reach zero and if that happened, there is no
benefit for markets, and no one has to care about the economy
Economic goods = scarcity | Goods are consumers desire to have efficiency such as the
United States. It is very rare to find each one has what he desired. Another example is
Africa millions of people who suffer hungry.
Macroeconomics: Considered the overall economy, which was formed by John Maynard
Keynes in 1936. For example, how central banks manage their interest rates and money.
Microeconomics: Adam Smith was the founder for Microeconomics in 1776, which was
focused individually for markets, firms, and households. He also studied the prices
individually of land, labor, and capital.
Normative economic: Cannot be tested because there is no wrong and right answer for
normative statements. For example, Should cigarettes get higher taxes in the States to
decrease smoking?
Positive economic: Can be tested by its facts. It is not easy to answer but you need
references to solve it, so you can get the evidence.
Fallacy of composition: We assume that the whole is different than the sum of the
system parts. For example, if everyone has more money, society will be worse than
before.
Post hoc fallacy: It happened when the first event caused the second event. It was
preceded by rising prices in 1930s in the United States.
“Keep other things constant”: When you analyze the impact of a variable on the
economic system, you have to hold the other things constant.
What: When and how many possible goods and services must be determined by the
society in specific time and place.
How: People, resources, and techniques are different in each production.
For whom: It depends on the rich and poor people; it only depends on the income.
Alternative economic systems: It is other answer for the pervious answer (what, how…)
Command: Government makes all the important decisions about production and
consumption such as a government own most of the lands and capitals.
Market: Private firms that make the decisions for the production and consuming.
Laissez-faire: When government doesn’t affect the market, and doesn’t make decisions
about it.
Mixed economic: Most of the countries use mixed economic which include the free of
speech, private ownership of resources relatively, and government intervention in the
economy.
Inputs: Factors of production that can produce good or services.
Outputs: Variety of goods or services that comes from the process of the production. For
example, the ingredients for the pizza are the inputs, and the cooked pizza is the output.
Productive-Possibility frontier (PPF): Shows the maximum quantity of goods for the
economy that can produce it efficiently, and it also give the technological knowledge for
the available inputs.
Productive efficiency: It happened when economy cannot produce specific good without
producing another good that means the economy it is on the PPF.
Productive inefficiency: To produce the maximum quantities of output from a given set
of inputs reaching the PPF.
Opportunity cost: In order to do one thing, you have to give up other item like walking
will make your weight less.
Chapter 2
Market: Is a mechanism that buyers and sellers gathers to exchange goods, services, and
assets with money.
Market Mechanism: An excellent way of marketing that private firms product to get a
high income to sustain and improve the country’s economy.
Market for goods and for factors of production: Is a land that people buy goods.
Prices as signals: Is the amount or value of money, and as a signal to produce and
consume.
Market equilibrium: Balance between Demand and supply in the market.
Perfect competition: No consumer or firm can affect the price of the market like the
corn in Iowa.
Imperfect competition: The seller or the buyer can affect the price of the market
somehow like the monopolist.
Adam Smith’s invincible- hand doctrine: It states when demand and supply reach their
equilibrium in the economy market with no government interference.
Specialization: People can be highly productive and exchange goods with other products.
Division of labor: Divide productive into a small-specialized duty.
Money: To measure an economic value for a specific good or service in term of
payments.
Factors of production: The inputs of production that makes an economy profit.
Land: An exclusive universe for sellers to make their production.
Labor: Is the work that seller’s exertion to make a good or service.
Capital: Wealth is used in order of the process production for exchanging money with
good or service.
Private property: An economic institution that households with no government
intervention owned and hold property resources.
Property rights: Give the owners the rights to do whatever they want with their
production of good and exchange it with its price.
Efficiency: Is the balance in the economy for the buyers and the sellers.
Equity: Is the amount of good that spilt to the people fairly.
Stability: prevent prices from changing from good to bad.
Inefficiencies: A situation that resources are not enough.
Monopoly: A situation when an institute control the goods and make them less without
competes with other institute.
Externalities: Market disaster that affect the market prices for the buyers, which
occurred by unrelated parties. Sometimes it becomes positive for the buyers.
Inequity of incomes under markets: When the income is not balanced in the term of
incomes for the market.
Macroeconomic policies: Problems that happened to the society‘s economy.
Fiscal: Money from the tax system.
Monetary policies: The change of a currency stock and prime bank rate.
Stabilization: There is no balance that holds the fiscal issues in that particular economy.
Growth: Raise the saving rate for the national income and improve the efficiency of tax
system.
Chapter 3
Supply: The seller’s goods.
Supply schedule: Is a graph that shows the relationship between the price, good, and
quantity supplied (QS).
Influences affecting supply curve: Price of factor of production, technology, and
indirect taxes.
Demand: The buyer’s money to buy a good or service.
Demand schedule: Is a graph that shows the relationship between the price, good, and
quantity demanded (QD).
Influences affecting Demand curve: Balance product and services, income, and market
size.
Law of downward-sloping demand: For example, when the price is raised and the other
things didn’t change, buyers will be less than before.
Equilibrium price: When price is above the equilibrium, the supply will be a surplus
and that equals to the QD.
Equilibrium quantity: Goods or services that sold in the equilibrium price.
Shifts of supply and demand: If there is a change of price, income, factor of production,
and so on will move the curve to the right or the left.
All other thing held constant: All the other prices being equal and some other
production is raising.
Rationing by prices: It has to be limited increasing to the good because if it was higher
for the consumers, they won’t buy it.
Chapter 20
National income: The incomes that come from the government, and include the labor
and capital investment.
Product income: The value of all the final prices of goods and services.
Real GDP: The construction of goods and services at recent prices.
Nominal GDP: The construction of goods and services at endless prices.
GDP deflator: Nominal GDP / Real GDP x 100 | to measure the prices of final goods
and services in specific time.
GDP= C+I+G+X Gross domestic product = consumption + gross private domestic
investment + government purchases + net exports (export – import).
NI= G – D Net investment= gross investment – depreciation
GDP equivalent views:
1-Product (upper loop) C & I & G & X = GDP
2-Earnings (lower loop) A- payment of labor (wages and salaries). B- Corporate profits.
C- other income (rent and interest). D. Depreciation. E. Net production taxes. = GDP
Intermediate goods: Goods are processed and they also used them for other production.
Value added: The improvement of product or service before they offered it to the buyers.
NDP= GDP – D Net domestic product= gross domestic product – depreciation
Government transfers: Money that given by the government such as for handicapped
and unemployed people.
Disposable income: The amount of money of the income that left after taxes.
Investment- saving identity:
I= S product- approach GDP – C = earning- approach GDP – C
I t = I + X = S p + S G = S T National investment = private investment + net exports =
private saving + government saving = national saving
Inflation: The overall increasing of the goods in the economy and caused by the supply
of money.
Deflation: when consumer prices begin to fall, that will affect the demand and the profit.
Price index:
GPI: Genuine Progress Indicator | measure the growth of an economy.
GDP price index: measure the changes in the prices of goods for two different years.
PPI: Producer price index | measure the change of prices for goods in specific time.
Growth-rate formulas: by graphing, make the table, and then using the formula to get
the accurate rate.