Economics

Economics is the study of production, distribution, and consumption of goods and services.

Definitions

According to Principles of Economics by Timothy Taylor (3rd edition),

Economics. The study of production, distribution, and consumption of goods and services.

Key concepts

• Economy. The social arrangements that determine what is produced, how it is produced, and for whom it is produced.
• Market. An institution that brings together buyers and sellers of goods or services.
• Market oriented economy. An economy in which most economic decisions are made by buyers and sellers, who may be individuals or firms.
• Command economy. An economy in which the government either makes or strongly influences most economic decisions.
• Black market. An illegal market that breaks government rules on prices or sales.
• Division of labor. Dividing the work required to produce a good or service into tasks performed by different workers.
• Specialization. When a worker or a firm focus on particular tasks in the overall production process for which they are well-suited.
• Economy of scale. When the average cost of producing each individual unit declines as total output increases.
• Globalization. The trend in which buying and selling in markets have increasingly crossed national borders.
• Exports. Goods and services that are produced domestically and sold in another country.
• Imports. Goods and services produced abroad and sold domestically.
• Microeconomics. The branch of economics that focuses on actions of particular actors within the economy, like households, workers, and business firms.
• Macroeconomics. The branch of economics that focuses on the economy as a whole, including issues like growth, unemployment, inflation, and the balance of trade.
• Circular flow diagram. A diagram that illustrates the economy as consisting of households and firms interacting in a goods and services market, a labor market, and a financial capital market.
• Goods and services market. A market in which firms are sellers of what they produce and households are buyers.
• Labor market. The market in which households sell their labor as workers to businesses or other employers.
• Financial capital market. The market in which those who save money provide financial capital and receive a rate of return from those who wish to raise money and pay a rate of return.

Related lectures

• What Economy Is