Chapter 2- Economic environment

specialization

People have different skills, talents, and interests, so they will be better at some jobs than at others. The particular advantages may be based on educational choices, which are shaped, in turn, by interests and talents.

Scaricity

The resources that we value—time, money, labor, tools, land, and raw materials—exist in limited supply. There are simply never enough resources to meet all our needs and desires.

economies of scale

as the level of production increases, the average cost of producing each individual unit declines

Microeconomics

focuses on the actions of individual agents within the economy, like households, workers, and businesses

Fiscal policy

involves government spending and taxes, is determined by a nation's legislative body. For the United States, this is the Congress and the executive branch, which establishes the federal budget.

Macroeconomics

looks at the economy as a whole

In a world of scarcity, we will never:

meet all of society's wants

Monetary policy

policies that affect bank lending, interest rates, and financial capital markets, is conducted by a nation's central bank. For the United States, this is the Federal Reserve.

Economics

the study of how humans make choices under conditions of scarcity.

opportunity cost

what must be given up to obtain something that's desired

In a planned economy, government determines what can be produced and:

what prices will be charged