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Chapter 2

Economist's and Economic Laws

TermDefinition
Laws of Economics The general rules or principles guiding the production, distribution, and consumption of goods
Selected Principles of Economics #1 The satisfaction of human wants always requires effort. Everything must be worked for.
Selected Principles of Economics #2 Because people have more wants than they can satisfy, they must choose which of their many wants to satisfy
Selected Principles of Economics #3 When certain goods are very scarce or useful, they become more valuable in relation to other goods
Selected Principles of Economics #4 Every society is limited by nature in its capacity to produce goods
Selected Principles of Economics #5 To produce goods, it is necessary to combine the four factors of production
Selected Principles of Economics #6 Prosperous individuals and societies try to produce goods(work) as efficiently as possible
Selected Principles of Economics #7 To acquire capital, or tools of production, individuals and societies must save, postponing consumption of other goods
Selected Principles of Economics #8 An increase in capital efficiency results in increased production
Selected Principles of Economics #9 Division of labor and specialization usually result in increased production
Selected Principles of Economics #10 Economies that practice the effective division of labor require some form of money to make the exchange of goods easier
Mercantilism A set of economic policies which aimed to biuld up the state's treasury
Trade Balance The difference in value of the goods that a country sells abroad compared to those it purchases from other countries. One of the main concerns of mercantilistic governments
Tariffs Taxes that governments apply only to imported goods
Imperialism The establishment of colonies and extensive territories created to benefit their mother countries. Mercantilism advocated imperialism
Physiocrats Some of the earliest influential advocates of "laissez-faire" economics, a French phrase meaning "let things alone". This doctrine says that a nation's economy is best left to itself and should not be stifled by government regulation
Classical Economics The theories developed by economists that stated that the free market was the best possible economic system. These theories came from the ideas of the Physiocrats
Mercantilists Believe #1 A nation's real wealth is determined by its store of precious metals(gold and silver)
Physiocrats Believe #1 A nation's real wealth is derived from the land and its natural resources
Mercantilists Believe #2 The importation of foreign goods should be limited through restrictions and high tariffs
Physiocrats Believe #2 Free trade should be encouraged among nations through the absence of excessive laws and taxes
Mercantilists Believe #3 Government is needed to control population patterns by dictating where people may live and where they may work in order to endure productivity
Physiocrats Believe #3 Government should allow people to make their own choices because free labor is more productive than controlled labor
Mercantilists Believe #4 Industries need governmental regulation, special privileges, and protection in order to ensure their survival
Physiocrats Believe #4 Industries flourish best when allowed to make their own choices, free of governmental intervention
Adam Smith The founder of modern economics
Division of Labor The separation of work to be performed into individual tasks
Specialization When the division of tasks among workers allows the production of goods by people doing the jobs they do best
Created by: TimHSEconomics
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