Week 2: Your Purpose in Business - Vocabulary

Flashcards covering core vocabulary from Week 2 notes on Adam Smith, trade, specialization, interdependence, and related concepts.

Wealth of Nations (1776)

Adam Smith's foundational work that argues trade and the division of labor increase wealth; often considered the birth of modern economics.

Father of Economics

A title commonly given to Adam Smith for his pivotal role in shaping economic thought.

Market economy

An economy in which goods and services are allocated through voluntary trade and price-driven decisions.

Subsistence economy

An economy where individuals produce everything they need for survival with little or no specialization.

Specialization

Concentrating on a narrow task or profession to become efficient and gain through trade.

Division of labor (DOL)

The separation of production into specialized tasks, enabling greater efficiency and trade.

Self-interest

The motive driving individuals to pursue their own benefit, which can lead to specialization and exchange.

Interdependence

Mutual reliance among individuals or economies due to gains from trade.

Cooperation

Mutually voluntary exchange or collaboration that yields benefits for all involved.

Zero-sum

A situation where one party's gain is exactly another's loss; often contrasted with positive-sum trade.

Positive-sum

A trade outcome in which all parties gain and overall welfare increases.

Invisible hand

Adam Smith's metaphor for how individual self-interest and competition guide resources to their best use.

Price mechanism

The process by which prices adjust to reflect supply and demand, guiding production and consumption.

Extraction

Taking goods by theft or fraud; considered unacceptable in cooperative exchange.

Mutually voluntary trade / honorable exchange

Trade that both parties consent to and perceive as beneficial.