Title: 1.1 What Is Economics, and Why Is It Important? – Principles of Microeconomics
Headings: 1.1 What Is Economics, and Why Is It Important?
1.1 What Is Economics, and Why Is It Important?
Learning Objectives
The Problem of Scarcity
The Division of and Specialization of Labor
Why the Division of Labor Increases Production
Trade and Markets
Why Study Economics?
Summary
Glossary

Content: 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. 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
However, specialization only makes sense if workers can use the pay they receive for doing their jobs to purchase the other goods and services that they need.