Economics: Difference between revisions

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== Useful Economic vocabulary, models & theories ==
== Useful Economic vocabulary, models & theories ==
=== Cost ===
=== Cost ===
* prospective cost
** a cost of a transaction that may be avoided if action is taken
* sunk cost
* sunk cost
** a cost of a transaction that has already been incurred, and is therefore irretrievable (can't be taken back)


=== goods ===
=== goods ===

Latest revision as of 20:09, 2 April 2023

Economics

  • See also [Social Studies Skills|Social Studies Skills]

[Category:Social Studies]

Economics point of view

Economists look at human relations and outcomes through certain lenses, including:[edit | edit source]

  • values & exchange
  • utility
  • incentives
  • impacts

Useful Economic vocabulary, models & theories[edit | edit source]

Cost[edit | edit source]

  • prospective cost
    • a cost of a transaction that may be avoided if action is taken
  • sunk cost
    • a cost of a transaction that has already been incurred, and is therefore irretrievable (can't be taken back)

goods[edit | edit source]

  • Complement good
  • Coordination good
  • Free goods
  • Inferior goods
  • Normal goods
  • Public good
    • services available to all that have no competition, such as utilities
      • use of a public good by one person does not reduce its availability to another
  • Substitute good

labor[edit | edit source]

  • division of labor
  • flexibility of labor

externalities[edit | edit source]

  • = impacts or consequences upon others (external)
  • externalities have an inherent duality
    • the external actors must be present for the external impact
      • i.e., if nobody lives near the factory, its noise won't bother anyone
        • the noise is an externality only because people can hear it
      • however, those people living near it may have a benefit that is greater than the externality
        • such as jobs, whatever the factory is making, etc.
    • from economist Cose

Opportunity cost[edit | edit source]

Prisoner's Dilemma[edit | edit source]

  • the "prisoner's dilemma" represents a clash of individual versus group interests
    • "dilemma" = a problem for which the solutions all reach a negative outcome
  • in the prisoner's dilemma, two prisoners must select between 1) confess to the crime or 2) remain silent
    • each is held separately and does not know what the other will choose
  • Option 1 choices:
    • Prisoner 1 (P1) confesses
    • Prisoner 2 (P2) remains silent
    • outcome: P1 goes free & P2 serves the worst jail sentence with no chance for parole (no chance to be let out of jail early)
  • Option 2 choices
    • P1 remains silent
    • P2 confesses
    • outcome: P2 goes free & P1 serves the worst sentence
  • Option 3 choices:
    • both confess
    • outcome: both serve the worst jail sentence but will be allowed "early parole" (let out early)
  • Option 4 choices:
    • both remain silent
    • outcome: both will face a lesser charge and less jail time
Prisoner's Dilemma Choice Matrix
Option Best outcome

individually

Worst outcome

individually

Worst outcome

collectively

Best outcome

collectively

Highest risk

indivdiually

Lowest risk

individually

Option 1:
  • P1 confesses/
  • P2 remains silent
P1 goes free P2 serves longest term
Option 2:
  • P2 confesses/
  • P1 remains silent
P2 goes free P1 serves longest term
Option 3:
  • both confess
Option 4:
  • both remain silent
  • the most potentially beneficial option for themselves individually, they both will serve the longest jail term

rationing[edit | edit source]

scarcity[edit | edit source]

  • aggregate supply

Supply & demand[edit | edit source]

  • Say's Law
    • from Jean-Baptiste Say, "A Treatise on Political Economy" (Traité d'économie politique), 1803
  • states that production is the source of demand
    • production = making things, providing services or things of value)
    • i.e, demand for things necessarily follows their production or offering
      • demand may pre-exist something, but nothing of value is exchanged until that thing is produced and offered
    • Say's law is criticized for ignoring "gluts" (supply exceeds demand) and monetary impacts (such as inflation or deflation, which can impact demand outside of supply)
  • in general, Say's law correctly identifies the source of exchanged value: something must be offered for value

Tragedy of the Commons[edit | edit source]

Corporate governance[edit | edit source]

ESG[edit | edit source]

Shareholder Theory[edit | edit source]

Stakeholder Theory[edit | edit source]

Lesson Plans[edit | edit source]