Title: Principles of Microeconomics/What Economics Is and Why It's Important - Wikibooks, open books for an open world
Headings: Principles of Microeconomics/What Economics Is and Why It's Important
Principles of Microeconomics/What Economics Is and Why It's Important
Contents
The Problem of Scarcity
The Division of and Specialization of Labor
Why the Division of Labor Increases Production
Trade and Markets
Why Study Economics?
Key Concepts and Summary
Self-Check Questions
Click on a question to see the answer.
Review Questions
Critical Thinking Questions
References
Glossary

Content: If you live in or near a big city, it is easier to attract enough customers to operate a successful dry cleaning business or movie theater than if you live in a sparsely populated rural area. Whatever the reason, if people specialize in the production of what they do best, they will be more productive than if they produce a combination of things, some of which they are good at and some of which they are not. 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.