Unit 1 Flashcards
What is scarcity?
Human wants for goods, services, and resources exceed what is available.
What is the division of labor?
the production of a good or service is split into many small tasks performed by different people
What is specialization?
Workers focus on parts of the production process where they have an advantage
What is core competency?
A business’ focus on a particular good it specializes in
What are economies of scale?
For many goods, as the level of production increases, the cost to produce each individual unit declines
What is microeconomics?
Economic focus on households, firms, and individuals
What is macroeconomics?
The economy as a whole–inflation, government spending, unemployment
What is monetary policy?
-Nation’s central bank
-Lending, interest rates, and capital markets
What is fiscal policy?
A nation’s legislative branch–government spending, taxes
Who pointed out that economics was a way of thinking?
John Maynard Kings
What is a theory?
A theory is a simplified representation of how two or more variables interact with each other
What are the three economy structures?
Traditional, market, and command
What is a traditional economy?
Occupations stay in the family
Traditional farming
Little economic progress
What is a command economy?
Economic effort is devoted to goals passed down from a ruling class
Communism
Government provides healthcare and education, but controls prices, wages, etc
What is market economy?
Decision-making is decentralized
Based on private enterprise: private individuals or groups control production
Based on supply/demand
Person’s income is based on how valued they are in society
What are regulations used for?
No such things as a completely free market
Cause underground economies (black markets)
What is globalization?
The expanding cultural, political, and economic connections between people around the world
What caused globalization?
-Easier trade
-Easier communications
-International trade agreements
What is comparative advantage?
-A country has a lower opportunity cost than another country for producing a particular good
What is allocative efficiency?
the particular combination of goods on the PPF that society most desires
What is the law of diminishing returns?
-The more input you put into a particular task, the smaller the benefit is going to be
