Introduction to Economics

A set of vocabulary flashcards based on introductory concepts in economics.

Economics

The study of how humans make decisions in the face of scarcity.

Scarcity

The condition where human wants for goods, services, and resources exceed what is available.

Division of Labor

The way in which different workers divide required tasks to produce a good or service.

Specialization

When workers or firms focus on particular tasks for which they are well-suited within the overall production process.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, typically resulting in lower average costs per unit.

Microeconomics

The branch of economics that focuses on the actions of individual agents within the economy.

Macroeconomics

The branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance.

Monetary Policy

Policy that involves altering the level of interest rates, the availability of credit, and the extent of borrowing.

Fiscal Policy

Economic policies that involve government spending and taxes.

Globalization

The trend in which buying and selling in markets have increasingly crossed national borders.

Gross Domestic Product (GDP)

A measure of the size of total production in an economy.

Circular Flow Diagram

A model that shows how households and firms interact in the goods and services market as well as the labor market.

Traditional Economy

An economy where economic decisions are based on customs and historical precedent.

Command Economy

An economy where economic decisions are passed down from government authority and the government owns the resources.

Market Economy

An economy where economic decisions are decentralized and private individuals own resources.