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circular flow diagram
Shows interaction between households and firms.
Production Possibilities Frontier (PPF)
Represents trade-offs and efficiency in production.
command economy
Government controls economic decisions (e.g., Cuba, North Korea).
division of labor
Tasks are split among workers to improve productivity.
economics
the study of how humans make choices under conditions of scarcity
economies of scale
when the average cost of producing each individual unit declines as total output increases
exports
products (goods and services) made domestically and sold abroad
fiscal policy
Government actions like taxation and spending.
globalization
Driven by advancements in technology, trade agreements, and international business expansion.
goods and services market
a market in which firms are sellers of what they produce and households are buyers
gross domestic product (GDP)
measure of the size of total production in an economy
imports
products (goods and services) made abroad and then sold domestically
labor market
the market in which households sell their labor as workers to business firms or other employers
macroeconomics
Studies the economy as a whole (e.g., inflation, GDP).
market
interaction between potential buyers and sellers; a combination of demand and supply
market economy
Decisions are made by buyers and sellers.
microeconomics
Focuses on individuals, firms, and specific markets.
monetary policy
Managed by central banks (e.g., adjusting interest rates)
private enterprise
system where private individuals or groups of private individuals own and operate the means of production (resources and businesses)
scarcity
when human wants for goods and services exceed the available supply
specialization
Increases efficiency by dividing labor among workers.
theory
a representation of an object or situation that is simplified while including enough of the key features to help us understand the object or situation; aka model
traditional economy
typically an agricultural economy where things are done the same as they have always been done
underground economy
a market where the buyers and sellers make transactions in violation of one or more government regulations
