Chap 1 Flashcards
the study of how humans make decisions under conditions of scarcity
economics
human wants for goods, services, and resources exceed the available supply
scarcity
the father of economics
Adam Smith
what book did Adam Smith write
The Wealth of Nations
what topics did Adam Smith introduce
division of labor and specialization; self interest; the invisible hand of the marketplace
the way in which different workers divide required tasks to produce a good or service
division of labor
_______ in a particular small job allows workers to focus on the parts of the production process where they have an advantage
specialization
when the average cost of producing each individual unit declines as total output increases
economies of scale
when workers or firms focus on particular tasks for which they are well suited within the overall production process
specialization
the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance
macroecomics
the branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firms
microeconomics
economic policies that involve government spending and taxes
fiscal policy
policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing
monetary policy
one of the greatest economists of the twentieth century who said that economics is a way of thinking and advocated for the government to tweak the economy to get it back on track
John Maynard Keynes
a diagram that views the economy as consisting of households and firms interacting in a goods and services market and a labor market
circular flow diagram
a market in which firms are sellers of what they produce and households are buyers
goods and services market
the market in which households sell their labor as workers to business firms or other employers
labor market
a representation of an object or situation that is simplified while including enough key features to help us understand the object or situation
theory/model
a theory is sometimes a more abstract representation while a model is a more applied or empirical representation
an economy where economic decisions are passed down from government authority and where the government owns the resources
command economy
products (goods and services) made domestically and sold abroad
exports
the trend in which buying and selling in markets have increasingly crossed national borders
globalization
measure of the size of total production in an economy
gross domestic product (GDP)
products (goods and services) made abroad and then sold domestically
imports
interaction between potential buyers and sellers; a combination of demand and supply
market
an economy where economic decisions are decentralized, private individuals own resources, and businesses supply goods and services based on demand
market economy
system where private individuals or groups of private individuals own and operate the means of production (resources and businesses)
private enterprise
typically an agriculture economy where things are done the same as they have always been done
traditional economy
a market where the buyers and sellers make transactions in violation of one or more government regulations
underground economy
