Chapter 1 Financial Literacy

Economics

The study of how people make decisions under scarcity, balancing limited resources against unlimited wants.

Scarcity

Limited resources versus unlimited wants.

Trade-offs

Choosing one thing means giving up another due to scarcity.

Division of Labor

Specialization in specific tasks to increase efficiency and productivity.

Economies of Scale

Cost advantages that a business obtains due to the scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units.

Microeconomics

The study of individual economic units such as households and firms.

Macroeconomics

The study of the overall economy, focusing on large-scale economic factors like inflation and unemployment.

Market Economy

An economic system driven by private ownership and the forces of supply and demand.

Command Economy

An economic system where government controls production, pricing, and distribution.

Globalization

The increasing economic interdependence between countries through trade and capital flows.

Fiscal Policy

Government decisions regarding taxation and spending.

Monetary Policy

Central bank regulation of the money supply and interest rates.