FEATURE 5 Specialization and Markets
A market economy encourages efficient use of resources by allowing people and businesses to specialize in what they do best. Specialization is a situation in which people concentrate their efforts in the areas in which they have an advantage. This allows people to trade what they can most efficiently produce for goods and services # produced more efficiently by others. Specialization removes the need for households to be self-sufficient, and markets allow households to trade for what they need.
Suppose one adult in your house is a bank teller and another is a welder. Neither banking nor welding needs to happen within your household, but your household does need groceries. By specializing in what they do best—earning money in their jobs—in a market economy these adults are able to trade the dollars they earn for items and services others specialize in. If, however, they had to grow all the family’s food themselves, they’d be less efficient than those who specialized in farming. Also, with each hour spent on growing food they would lose an hour’s worth of wages from their jobs. Specialization, then, leads to higher-quality yet lower-priced products.
| a. The property of distributing economic prosperity uniformly among society's members b. A situation in which the market fails to allocate resources efficiently c. Limited resources and unlimited wants d. The amount of goods and services produced from each unit of labor input e. The case in which there is only one seller in the market f. The principle that self-interested market participants may unknowingly maximize the welfare of society as a whole g. . The property of society getting the most from its scarce resources h. An economic system where interaction of households and firms in markets determines the allocation of resources i. Fluctuations in economic activity j. When one person's actions have an impact on a bystander k. An increase in the overall level of prices l. Incremental adjustments to an existing plan m. Study of how society manages its scarce resources n. Whatever is given up to get something else o. The ability of an individual or group to substantially influence market prices p. Something that induces a person to act q. . The ability of an individual to own and exercise control over scarce resources r. Systematically and purposefully doing the best you can to achieve your objectives |
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Open questions.
1. Is air scarce? Is clean air scarce?
2. Why is there a trade-off between equality and efficiency?
3. A goal for a society is to distribute resources more equally and fairly. How might you distribute resources if everyone were equally talented and worked equally hard? What if people had different talents and some people worked hard, while others did not?
4. In the ~Wealth if Nations, Adam Smith said, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." What do you think he meant?
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