Chapter 1 - Intro Flashcards
Economics
The study of how humans utilize resources
Scarcity
The desire for goods and services outweighs resources available
Adam Smith
Innovation of division and specialization of labour
Division of labour
Dividing tasks among workers instead of everyone doing everything
Specialization of labour
Focus on one part of production at which you have an advantage
Advantages of specialization of labour (3)
- People can do what they are good at/they can do what is most profitable
- When given one task, people learn to it very well and produce higher quality items efficiently
- Cost of producing decreases as level of production increases
Economies of scale
Price decreases, level of production increases, cost of producing decreases
Does specialization require trade?
Yes. If you only do one task, how can you do anything else like build a house, make food, etc. You must trade your task and money earned for things you do not have.
Why study economics?
Learning about economics helps you understand the major problems facing the world today, prepares you to be a good citizen, and helps you become a well-rounded thinker
Microeconomics
Actions of individual aspects, such as companies and workers
Macroeconomics
Big picture aspects, such as inflation and unemployment
Monetary policy
Bank lending, interest rates, etc. conducted by a central bank
Fiscal policy
Government spending dictated by a legislative body
John Maynard Keynes’ famous introduction
Economics is a method rather than a doctrine
John Maynard Keynes
Involved in helping the country in the Great Depression by innovating things such as unemployment insurance
