Key Terms
Economics starts with one fact
Resources are limited. Time, money, land — none of it is infinite.
Opportunity cost
The value of the next best alternative you give up when making a choice.
Division of labor
Splitting production into tasks performed by different workers. Specialization: workers or firms focusing on tasks they
Economies of scale
As total output increases, the average cost of producing each unit decreases. A factory making 50,000 units can invest i
Microeconomics
Focuses on the decisions of individual agents — households, workers, businesses. Asks how and why specific actors make s
Macroeconomics
Focuses on the economy as a whole — growth, unemployment, inflation, trade balance. Asks how the entire system behaves.
Three main macroeconomic goals
1. Growth in standard of living 2.
Monetary policy
Affects bank lending, interest rates, and financial capital markets. Conducted by a nation's central bank.
Fiscal policy
Involves government spending and taxes. Determined by Congress and the executive branch through the federal budget.
Function
A relationship involving one or more variables that describes cause and effect. The left side is the effect; the right s
Example
Price and quantity demanded move in opposite directions.
Variable
A quantity that can take a range of values; represented by a letter. Slope: rise over run; measures how two variables re
Solve in this sequence
1. Parentheses and brackets first 2.
Most common equation in this course
Y = b + mx (equation of a line)
Formula
Slope = rise / run = change in vertical axis / change in horizontal axis