Key Terms
Economics starts with one fact
Resources are limited and wants are unlimited. Economists call this scarcity.
Opportunity cost
The value of the next best alternative given up when a choice is made.
Division of labor
Splitting production into separate tasks performed by different workers.
Microeconomics
Study of individual economic agents (households, firms, workers).
Macroeconomics
Study of the economy as a whole (growth, unemployment, inflation).
Monetary policy
Central bank controls interest rates and credit availability.
Fiscal policy
Government controls spending and taxation through Congress.
Example
If y = 24 and y = 9 + 3x: 24 = 9 + 3x 15 = 3x x = 5
Formula
Slope = rise / run = change in vertical / change in horizontal
Positive slope
Variables move in the same direction.
Negative slope
Variables move in opposite directions.
Zero slope
Y does not change regardless of x. The line is flat.
Points
(2, 1) and (6, 3) Rise = 3 - 1 = 2 Run = 6 - 2 = 4 Slope = 2/4 = 1/2
Scarcity
Resources are limited; wants are unlimited; forces all agents to make choices.
Specialization
Workers or firms focusing on tasks they are best suited for.