Chapter 2 Flashcards
Economics
Choices made with limited resources
Scarcity
Not enough resources to satisfy all desires
Opportunity Cost
What must given up to obtain what is desired
Division of Labor
which means that the way a good or service is produced is divided into a number of tasks that are performed by different workers
Specialization of Labor
Each worker is skilled at a certain task
Macroeconomics
TOTAL ECONOMY
Standard of living
Low Unemployment
Low Inflation
Microeconomics
Individual Agents and Industries
Economies of scale
for many goods, as the level of production increases, the average cost of producing each individual unit declines
Free Market Economy
A free market is one in which the government does not intervene in any way
Competitive Market
there is a large number of buyers and sellers, so that no one can control the market price.
Planned Economy
economic effort is devoted to goals passed down from a ruler or ruling class
Mixed Economy
combine elements of command and market systems
Law of Demand
A rise in the price of a good or service almost always decreases the quantity of that good or service demanded.
Law of Supply
that a higher price leads to a higher quantity supplied and a lower price leads to a lower quantity supplied
Business Cycle
Expansion (Growth)
Peak (Highest Point of Growth)
Contract (Growth slows, Employment drops)
Trough (Slowing ceases, Economy’s lowest point)
