Flashcards
The 10 Lessons from Economics
Cards in this deck (8)
- 1Lesson 1: People face trade-offsThe trade off between Efficiency and Equity.
E.g. Less rent assistance: Lower living standards. The rich pay more tax: less incentive for hard work means less efficiency.
More simply put: More money: Less material items, More fun: Less savings. - 2Lesson 2: The cost of something is what you give up to get it.The opportunity cost, or your sacrifices. E.g. A sports star will consider a $10million contact as higher value than a uni degree. Or an individual may consider stylish hair to be more valuable than saving money.
- 3Lesson 3: Rational People think at the margin.Rational people can determine what the benefits and costs will be when making a decision and determine a point when the costs outweigh the benefits. E.g. DFO outlets. Stock sold at a reduced cost will still cover wages, rent and product costs. If the cost of wages, rent and profit margin is negative then it's not worth having the DFO store.
- 4Lesson 4: IncentivesReducing opportunity costs for society and changing it's decisions. To sell something the buyer must have an incentive to purchase.
- 5Lesson 5: Trade can make everyone better offKnowing and understanding the skills a person/country possess and taking advantage of that. For example, Italian truffles are better than Australian truffles but Australian beef is better than Italian beef so we both win when we trade the two.
- 6Lesson 6: Markets are usually a good way to organise economic activityThe market economy consists of firms and households that are not dictated by a leader. We buy where we want and deal with who we want.
Taxes can affect firms ability to price and sell goods. Similarly, tax can affect peoples ability to afford goods. E.g. Cigarettes.
The invisible hand movement refers to when society is left to price and sell goods on it's own, which usually results in a more fair and more more functional market. - 7Lesson 7: Governments can sometimes improve market outcomesGovernment is required to oversee and police economic behavior. E.g. Police trade marks etc.
See following cards all relevant to lesson 7. - 8Market failure:When government must intervene because a market left to it's own devices has failed to allocate resources effectively. Including- Externalities: The uncompensated impact of one person's actions on the well-being of a bystander. Market Power: The ability for a single economic actor (group) to have a substantial influence on market price- no competition.
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- Week 1/2- PART B
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- Tammy Fleming
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