Chapter 1 and 2

an economy where economic decisions are passed down from government authority and where the government owns the resources

• command economy

• Traditional Economy

• Free Market Economy

• Capitalist Economy

Typically an agricultural economy where things are done the same as they have always been done

• Command Economy

• traditional economy

• Capitalist Economy

• Free Market Economy

an economy where economic decisions are decentralized, private individuals own resources, and businesses supply goods and services based on demand

• Traditional Economy

• Market Economy

• Command Economy

• Communist Economy

when workers or firms focus on particular tasks for which they are well-suited within the overall production process

• division of labor

• scarcity

• globalization

• specialization

when the average cost of producing each individual unit declines as total output increases

• globalization

• macroeconomics

• fiscal policy

• economies of scale

he branch of economics that focuses on actions of particular agents within the economy, likehouseholds, workers, and business firms

• specialization

• macroeconomics

• microeconomics

• economies of scale

when the mix of goods produced represents the mix that society most desires

• budget constraint

• opportunity cost

• productive efficiency

• allocative efficiency

when a country can produce a good at a lower cost in terms of other goods; or, when a country has a lower opportunity cost of production

• comparative advantage

• absolute advantate

• utility

• marginal analysis

as we consume more of a good or service, the utility we get from additional units of the good or service tends to become smaller than what we received from earlier units

• law of diminishing returns

• law of diminishing marginal utility

• law of increasing marginal utility

• opportunity cost

when it is impossible to produce more of one good (or service) without decreasing the quantity produced of another good (or service)

• productive efficiency

• marginal analysis

• reductive efficiency

• allocative efficiency