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Second, workers who specialize in certain tasks often learn to produce more quickly and with higher quality. This pattern holds true for many workers, including assembly line laborers who build cars, stylists who cut hair, and doctors who perform heart surgery. In fact, specialized workers often know their jobs well enough to suggest innovative ways to do their work faster and better.

A similar pattern often operates within businesses. In many cases, a business that focuses on one or a few products (sometimes called its “ core competency ”) is more successful than firms that try to make a wide range of products.

Third, specialization allows businesses to take advantage of economies of scale    , which means that for many goods, as the level of production increases, the average cost of producing each individual unit declines. For example, if a factory produces only 100 cars per year, each car will be quite expensive to make on average. However, if a factory produces 50,000 cars each year, then it can set up an assembly line with huge machines and workers performing specialized tasks, and the average cost of production per car will be lower. The ultimate result of workers who can focus on their preferences and talents, learn to do their specialized jobs better, and work in larger organizations is that society as a whole can produce and consume far more than if each person tried to produce all of their own goods and services. The division and specialization of labor has been a force against the problem of scarcity.

Trade and markets

Specialization only makes sense, though, if workers can use the pay they receive for doing their jobs to purchase the other goods and services that they need. In short, specialization requires trade.

You do not have to know anything about electronics or sound systems to play music—you just buy an iPod or MP3 player, download the music and listen. You do not have to know anything about artificial fibers or the construction of sewing machines if you need a jacket—you just buy the jacket and wear it. You do not need to know anything about internal combustion engines to operate a car—you just get in and drive. Instead of trying to acquire all the knowledge and skills involved in producing all of the goods and services that you wish to consume, the market allows you to learn a specialized set of skills and then use the pay you receive to buy the goods and services you need or want. This is how our modern society has evolved into a strong economy.

Why study economics?

Now that we have gotten an overview on what economics studies, let’s quickly discuss why you are right to study it. Economics is not primarily a collection of facts to be memorized, though there are plenty of important concepts to be learned. Instead, economics is better thought of as a collection of questions to be answered or puzzles to be worked out. Most important, economics provides the tools to work out those puzzles. If you have yet to be been bitten by the economics “bug,” there are other reasons why you should study economics.

  • Virtually every major problem facing the world today, from global warming, to world poverty, to the conflicts in Syria, Afghanistan, and Somalia, has an economic dimension. If you are going to be part of solving those problems, you need to be able to understand them. Economics is crucial.
  • It is hard to overstate the importance of economics to good citizenship. You need to be able to vote intelligently on budgets, regulations, and laws in general. When the U.S. government came close to a standstill at the end of 2012 due to the “fiscal cliff,” what were the issues involved? Did you know?
  • A basic understanding of economics makes you a well-rounded thinker. When you read articles about economic issues, you will understand and be able to evaluate the writer’s argument. When you hear classmates, co-workers, or political candidates talking about economics, you will be able to distinguish between common sense and nonsense. You will find new ways of thinking about current events and about personal and business decisions, as well as current events and politics.

The study of economics does not dictate the answers, but it can illuminate the different choices.

Key concepts and summary

Economics seeks to solve the problem of scarcity, which is when human wants for goods and services exceed the available supply. A modern economy displays a division of labor, in which people earn income by specializing in what they produce and then use that income to purchase the products they need or want. The division of labor allows individuals and firms to specialize and to produce more for several reasons: a) It allows the agents to focus on areas of advantage due to natural factors and skill levels; b) It encourages the agents to learn and invent; c) It allows agents to take advantage of economies of scale. Division and specialization of labor only work when individuals can purchase what they do not produce in markets. Learning about economics helps you understand the major problems facing the world today, prepares you to be a good citizen, and helps you become a well-rounded thinker.

References

Bureau of Labor Statistics, U.S. Department of Labor. 2015. "The Employment Situation—February 2015." Accessed March 27, 2015. http://www.bls.gov/news.release/pdf/empsit.pdf.

Williamson, Lisa. “US Labor Market in 2012.” Bureau of Labor Statistics . Accessed December 1, 2013. http://www.bls.gov/opub/mlr/2013/03/art1full.pdf.

Questions & Answers

what is equillibrium
riy Reply
Equilibrium is a state of balance e.g supply equals demand then there is no oversupply or shortage of goods
Scelo
When price increases quantity demnd alway decreases
Sonu Reply
this is because when price increase,consumer can longer effort to pay as they usually do thereby leading to the fall in dd
Muafue
Explain the impact of increase price of substitude goods an equilibirum price and equilibirum quantity
Sonu
Again according to the first law of demand which state that more is demanded at higher price than at lower price.Because of this consumer believe that more can only be demand at low prices than higher prices meaning that a slide change in price will affect demand
Muafue
what are the functions of money?
Liza Reply
medium of exchange
Alhassan
Medium of exchange,store of value,standard for differ payment and unit of account
Muafue
A medium of exchange for goods and services
Allen
what is demand for labour?
Allen
boumols inventory theory?
Vyshnavi Reply
what is inflation?
Jestony Reply
the increase in general price level and the decrease in money value
Inflation can be define as the persistence rise in the general price level of goods and services in the market
Muafue
what are the three reason tgat we study economics
armaan Reply
we may be rational people, know efficient where met profit maximization, know efficient allocation
li
1.How monetary and fiscal policy create stable economy. 2. How to create fairness for all citizens. 3. Determine drivers of human economic behavior.
Mark
To know that you we need understand the demand and supply and others important matters in economics
emz
can you explain. what is the reasons for having international trade
atikah Reply
to aid productivity and efficiency, for economic growth, to help reduce dependence on local product
kunle
can someone please help differentiate between short and long run in microeconomics and macroeconomics
kunle
what is inflation in economic
Christopher Reply
a general increase price level and fall in purchasing value of money
a general increase in price level and fall in purchasing value of money
due to high supply of mony in the market the demand of goods will increase and price will high its call inflation.
Thalay
thanks
Christopher
how to calculate real and calculated unemployment rate for false information
James Reply
I think unemployment can't be calculated but I think due to economics survey that happens every year we come to know about unemployment rate and compares that with precocious year unemployment rate
are foreigners in our country helping our economy or not?
Nwabali Reply
foreign countries invest in India by two ways one for there business promotion(of their product ) through employment which employment generates in India and the 2nd is foreign aid fund means when a country suffers from flood,earthquake etc so other countries help them financial(called foreign aid)
simple answer is yes
Yes, this is through the investment as investors.
jossy
what is revenue commission?
Kelvyn Reply
is the organ which is collect tax from society for public servise
ABIYOT
Where is determination of price is done?
Vidhan Reply
when price equal with marginal cost
ABIYOT
what is demand
Fransis Reply
The willingness and ability to of a buyer to purchase a commodity
Moses
the thing that u r able to buy and which fullfill your want is called Demand
Stanzin
what u want to buy to fulfilling of yours desires is called demand
Thalay
explain manetary policy
Amina Reply
why SA is used in estimating of national income
Unique Reply
first what SA stand for?
Alhassan
SA stand for static adjustment
Unique
machenism of monetary expansion
EFAT
norther one
Unique
explain manetary policy
Amina

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Source:  OpenStax, Macroeconomics. OpenStax CNX. Jun 16, 2014 Download for free at http://legacy.cnx.org/content/col11626/1.10
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