Economics ABC BookBy: Fahad Almojel

Honey Bees and The RPG’s

Assumptions

An economist was making decisions about how much more honey to produce given the information he received that hundreds more bears were coming to town. He made an Assumption in his calculations that his information was accurate and so he traveled to see the bee keeper to prepare for this event.

A

Balance of Payments

The total of all the money coming into a country from abroad less all of the money going out of the country during the same period

B

Ceteris Paribus

As the Economist was making his assumption, he claimed that every thing is in Ceteris Paribus, from which he made his calculations which resulted accurately

C

Demand

The bears had high Demand for honey, so more honey was produced.

D

Expectations

The Economist made some calculations, and based on what he figured out, he had Expectations that the bears will soon not just finish all the honey that’s in the town, they’ll go crazy and also eat the people that live there and ruin the economy.

E

Foreign Direct Investment

So a successful business man suggested to buy a company that is overseas, which is dominant in producing powerful Rocket-Propelled Grenade’s (RPG’s) to blow away all the bears that are taking over the town.

F

GDP

Unfortunately, the GDP (Gross Domestic Product) rate, or the measure of economic activity in a country, started to drop because of the decrease in economic activity due to the death of many people in that town.

G

Hard Currency

Luckily, this country had a reserve of Hard Currency, like the euro, which made its economy more sustain.

H

Inflation

As a consequence of the bears eating all the honey in town, they had to import a large amount of honey, which high demand pulled the price up, or caused Inflation in the price of honey.

I

Joint Stock Company

The business man’s RPG company worked out successfully and exported a large number of RPG’s to that town to deal with the bears. The guy liked owning business in the RPG production industry, so he transferred his company into a Joint Stock Company in order to make it more profitable. This means many people purchased shares of the business and shared its risks and profits.

J

Keynesian

After the incident happened, the government were being aware of corporations and private sectors in order for them not to make the incident happen again, so the government took in control and supervised activities.

K

Labor

Due to the destruction that happened in the town, laborers were required to do some Labor work to re-build the infrastructure.

L

Model

After all the chaos that was been going on, the Economist collected lots of data and statistics in order to make a Model that explains the current situation of the town after the attack.

M

Nationalization

In fear of the business man’s RPG’s dominant company, the foreign country Nationalized it and had it under control.

N

Opportunity Costs

In order to make it a fair game, the government gave the business man the Opportunity Costs of the company.

O

Price

Prices of honey started to go down as before. It changed from $6.00 per jar, to $4.50 per jar.

P

Quartile

Part of the “ile” family that signposts positions on a scale of numbers

Q

Recession

At that period where lots of the town’s citizen’s were killed, no one could do their jobs, so the country started going through Recession.

R

Scarcity

During the bear attacks, the town was suffering from honey Scarcity, or lack of honey in other word.

S

Trade-Offs

The Trade-Off, or compromise that was being done between honey and RPG’s made people feel safer.

T

Utility

The Economist suggested to increase the utility of the RPG’s in order to be prepared for any bear attacks in the future.

U

Value

Ever since then, honey had a high Value and every one appreciated the existence of it.

V

Well - Being

Applying the suggestions that were discussed in the Economist’s model, the whole town became in a state of Well-Being.

j

W

X - efficiency

Producing output at the minimum possible cost

X

Yield

The Stocks which shareholders bought from that RPG company had a high Yield rate, or were more secure, because of the high demand that that people had for RPG’s which made it successful.

Y

Zero-Sum Game

And as for the business man, he created a new company in the RPG production industry, but it wasn’t as profitable as his old one, and it also wasn’t losing, it was a Zero-Sum Game.

Z

The End …

Index Assumptions: Something you expect – without proof, something accepted as true

without any real basis

Balance of Payments: The total of all the money coming into a country from abroad less all of the money going out of the country during the same period

Ceteris Paribus: with other conditions remaining the same, Other things being equal

Demand: A desire or request for a certain good or service

Expectations: Strong belief that something will happen or be the case in the future, they can be based on truths or assumptions.

Foreign Direct Investment: Investing directly in production in another country, either by buying a company there or establishing new operations of an existing business.

GDP: Gross domestic product, a measure of economic activity in a country

Hard Currency: Money you can trust. A hard currency is expected to retain its value

Inflation: Rising prices, across the board.

Joint Stock Company: a company whose stock is owned jointly by the shareholders

Keynesian: A branch of economics, based, often loosely, on the ideas of Keynes, characterized by a belief in active government and suspicion of market outcomes.

Labor: One of the factors of production, with land, capital and enterprise.

Model: An imitation, a prototype, a blueprint to follow, an explanation of reality, a theory

Nationalization: When a government takes ownership of a private-sector business

Opportunity Costs: The true cost of something is what you give up to get it.

Price: The price charged for something depends on the tastes income and elasticity of demand of customers.

Quartile: Part of the “ile” family that signposts positions on a scale of numbers

Recession: a period of slow or negative economic growth, usually accompanied by rising unemployment

Scarcity: Insufficient for demand, lack of something, a few of something

Trade-Offs: A balanced achieved two desirable but incompatible features; a compromise.

Utility: The state of being useful, profitable, or beneficial

Value: the material on monetary worth of something

Well-Being: the state of being comfortable, healthy, or happy

X-Efficiency: Producing output at the minimum possible cost

Yield: The annual income from a security, expressed as a percentage of the current market price of the security.

Zero-Sum Game: When the gains made by winners in an economic transaction equal the losses suffered by the losers

Citations

http://www.economicswebinstitute.org/concepts.htm

http://www.economist.com/research/economics/