ECONOMICS CONCEPTS

1. ECONOMICS CONCEPTS

2. CETERIS PARIBUS • CETERIS PARIBUS: "with other things [being] the same," • "Everything else remains constant". • Example: An increase of the price of oil will result in an increase of the general price level of the economy, ceteris paribus.

3. FACTORS OF PRODUCTION Are all the resources that contribute, or may contribute, to the production of goods and services. • Land: encompasses land and all resources derived from land (water, minerals, crops, etc) - PAYMENT: • Labor: effort expended by people to create goods or services - PAYMENT: • Capital : human-made resources that are used to produce other goods and services (tools, buildings, etc). There are two kinds of capital: Physical capital and human capital • Physical capital - human-made objects used to create other goods or services (machines, buildings, tractors, presses, etc). • Human capital - investments made in people including education, health and experience that help to produce more or better goods or services - PAYMENT: • Entrepreneurship: The ability and knowledge to combine the other 3 Factors. - PAYMENT:

4. SCARCITY “Insufficiency of supply for needs or specific demand” Resources are scarce according to the use of them. I.E. Economics books in “San Juan el Alto”. Economics books at the classroom. (18 issues) Because resources are limited, they are scarce.

5. UTILITY: • “The satisfaction received from consuming a good or service”

6. Opportunity Cost What would you do with $100? What would you do next Saturday? Resources are scarce, therefore decisions should be taken. CHOICES. Scarcity implies that choices must be made, and making choices implies the existence of costs! Opportunity Cost: “Is the cost of the next best alternative forgone”

7. Free and Economic Goods:“there is no free lunch” “A free good does not incur any opportunity cost in its production” “An economic good is a good which uses scarce resources in its production. That is why there is an opportunity cost of the alternative good foregone”

8. EXAMPLES OF COSTS: • Everything has a cost even if you don’t pay for it. • Fresh Air • Free e mail service. • You win the lottery. • National Security. • A sunset. • A full moon. • …

9. PRODUCTION PROSSIBILITY FRONTIER PPF

10. DIFFERENCE BETWEEN GROWTH AND DEVELOPMENT • Economic Growth: The rate of change in total output of a society from one year to the next. Is a quantitative measure. GDP. • GDP: Gross Domestic Product.

11. K goods Economic growth through investment In K goods. C goods ENHANCING growth through Industrialization (K/L) pp23

12. Public and merit goods Economic growth through investment In K goods. C goods Enhancing Growth through productivity (Q/L) (Q/L)

13. DEVELOPMENT • Economic Development: The process of improving the quality of human life through increasing per capita income, reducing poverty, and enhancing individual economic opportunities. Also includes better education, improved health and nutrition, conservation of natural resources, a cleaner environment, and a richer cultural life. Qualitative measure.

14. K and C goods Economic development Public and merit goods Development

15. SUSTAINABLE DEVELOPMENT • Sustainable Development: Development that meets the needs and aspirations of the current generation without compromising the ability to meet those of future generations.