circular flow diagram
a diagram that views the economy as consisting of households and firms interacting in a goods and services market . households receive goods and services and pay for them. in the labour market, households provide labour and receive payments from firms through wages, salaries, and benefits.
command economy
an economy where economic decisions are passed down from government authority and where governments own the resources. command economies have a centralized structure for economic decisions.
division of labour
the way in which different workers divide the required tasks to produce a good or service. Often, the greater degree of labour division, the higher productivity of workers due to specialization and economies of scale.
economics
the study of how humans make choices under scarcity.
economies of scale
when the average cost of producing each individual unit declines as total output increases.
exports
products (goods and services) made domestically and sold abroad.
fiscal policy
economic policies that involve government spending and taxes. it includes what governments spend resources on and how they collect taxes.
globalisation
the expanding cultural, political, and economic connections between people around the world.
goods and services market
a market in which firms are sellers of what they produce, and household are buyers. We also include firms purchasing from other firms.
Gross domestic product (GDP)
measure of the size of total production in an economy. It provides a measure of how much an economy can male to support local communities. GDP can refer to countries, provinces, and cities.
imports
products made abroad and then sold domestically
labour market
the market in which households sell their labour as to business firms or other employers.
macroeconomics
the branch of economics that focuses on broad issues such as growth, unemployment, inflation, and trade balance.
market
interaction between potential buyers and sellers; a combination of demand and supply.
market economy
an economy where economic decisions are decentralized, private individuals own resources, and businesses supply goods and services based on demand. Canada is considered a market economy.
microeconomics
the branch of economics that focuses on actions of particular agents within the economy, like households, workers, and business firms.
monetary policy
policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing.
private enterprise
system where private individuals or groups of private individuals own and operate the means of production.
scarcity
when human wants for goods and services exceed the available supply.
specialization
when workers or firms focus on particular tasks for which they are well-suited within the overall production process. specialization often leads to higher productivity as workers can produce more goods in the same amount of time.
theory
a representation of an object or situation that is simplified while including enough of the key features to help us understand the object or situation.
traditional economy
typically, and agricultural economy where things are done the same as they always have been. Most exchanges are through barter and direct trade. Individuals know each other and often have formal and informal social bonds.
underground economy
a market where the buyers and sellers make transactions in violation of one or more government regulations.
allocative efficiency
when the mix of goods produced represents the mix that society most desires. Allocative efficiency occurs when firms are producing the optimal quantity of each output.
