Openstax Economics Chapter 1

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23 Terms

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circular flow diagram

views economy as consisting of households and firms interacting in a goods and services marketing and labor market

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command economy

economy system where economic decisions are ppassed down from gov authority and where the gov owns the resources

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division of labor

different workers are assigned to different tasks that they specialize the most in to increase efficiency

different workers are divided to perform required tasks to produce a good or service

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economics

how humans make choices under conditions of scarcity

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economies of scale

when the average cost of producing each individual unit declines as total output increases

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exports

products (goods and services) made domestically and sold abroad

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fiscal policy

econ policies involving gov spending and taxes

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globalization

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

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goods and services market

market where firms are sellers of what they produce and households are buyers

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Gross Domestic Product (GDP)

measure of size of total production in an economy

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imports

products (goods and services) made abroad and then sold domestically

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labor market

market where households sell their labor as workers to business firms or other employers

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macroeconomics

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

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market

interaction between potential buyers and sellers; combination of supply and demand

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market economy

economy where economic decisions are decentralized, private individuals own resources and businesses supply goods and services based on demand

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microeconomics

branch focusing on actions of particular agents within the economy i.e. households, workers, and business firms

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monetary policy

policy that involves altering level of interest rates, availability of credit in economy and extent of borrowing

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private enterprise

system where private individuals or groups of private individuals own and operate means of production (resources and businesses)

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scarcity

when human wants for goods and services exceed available supply

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specialization

when workers/firms focus on certain tasks that they are well-suited for during production process to maximize efficiency

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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

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traditional economy

typically an agricultural economy where things are done the same as they have always been done

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underground economy

a marketing where buyers and sellers make transactions in violation of one or more