Scarcity- resources are scarce and decisions must be made
Opportunity cost- highest valued alternative
Micro- the study of the behavior of individuals, particular markets, firms, and industries
Macro- looks at the entire economy, or its major aggregates or households, businesses and the government
Factors of production- Land ex. Oil, Labor ex. Workforce/teacher, Capital ex. factories, Entrepreneurial ex. risk
Difference between command and market??? -the government drives the market as apposed to the consumer in a market economy
Adam Smith: the founder of economics
“The Wealth of Nations”- book
Invisible hand- the market will flow if people have their own self interest. Let the players of the market make their own decisions
Laissez faire- “let it be” “leave it alone” the government needs to stay out
Division of Labor- Henry Ford in the assembly line “specialized labor” high levels of productivity, making a lot more of whatever product.
Self interest-personal preference, we decide what we buy within our best self interest in the market.
Command System- known as Socialism or Communism. The government owns most property resources and economic decision making occurs through a central economic plan.
Market System- known as Capitalism. Is characterized by the private ownership of resources and the use of markets and prices to coordinate the and direct economic activity
Circular Flow- the flow of resources from households to firms and of products from firms to households.
State the law of demand- other things equal as the price falls the quantity demanded rises and as the price increases the quantity demanded falls
Detriments of demand-taste, number of buyers, income, change in the prices of related goods, and change in consumer expectations
State the law of supply- other things equal as price rises quantity supplied rises and as price falls quantity supplied falls
Detriments of supply- change in resource prices, technology, taxes and subsidies, prices of