Economics chapter 1

Economics

Study of human choices in face of scarcity

Scarcity

Human wants for goods/services and resources exceed what is available

Adam Smith

father of modern economics. He creates a way to divide work tasks to provide a bigger output of good/services.

division of labor

Work tasks split up into parts to provide a better output for goods/services

Microeconomics

Study of actions of individual agents within economy, households, workers.

Macroeconomics

branch of economics that focuses on borad issues such as unemployment rates.

Specialization

Particular small job allows worker to focus on the parts of production process that they have an advantage to

Benefits to specialization

Economies of scale

Production of a good increases, resulting in the average cost of producing each decline

Monetary Policy

Changes, interest rates and ability to borrow money, governed by national federal bank

Fiscal policy

Economics policies, involves government spending taxes. Determined by legislative/congress

Theory

How two or more variables interact with each other

Circular Flow diagram

Diagram that shows how two entities interact in goods and services market.

Understand economy, 3 questions to be asked

Three ways societies organize an economy

Market

Interactions between buyers and sellers; Supply and demand

Private enterprise

System for private individuals or groups that operate the means of production

Mixed economy

Combined elements of command,traditional, and market systems

GDP

Value of output produced in a country in a given year

Globalization

Trend in buying/selling in markets increasingly crossed national borders

Exports

Goods/services that nation produces domestically and sells abroad

Imports

Goods/services produced abroad then sold domestically