Explain a coincidence of wants. A situation in which two people each want what the other wants to trade; a condition necessary for barter to occur.
What is a division of labor and why is it important to our modern global economy? An approach to production in which different workers specialize in different tasks to achieve savings. It is important to our modern global economy because we can all exchange goods and services freely, allowing each country, or region, to take advantage of their particular natural resources or cultural strong points. As a result we all enjoy the best of each other and the best the world has to offer.
Why does division of labor lead to a higher standard of living for our society? First, by specializing in certain tasks, rather than trying to produce everything, people become more adept at those tasks and, therefore, more productive. Second, economies of scale develop, as the use of specialized machinery makes production even more efficient. With economies of scale, the per-unit cost of production goes down as you produce more.
What properties must money have in order to serve as an effective medium of exchange? Money must be acceptable to people who want to sell things. Money must be divisible, as the dollar is divisible into half dollars, quarters, dimes, nickels, and pennies. Money must be portable. It must be something that can be easily moved around in order to buy things. Money must be fungible. One unit of money must be interchangeable for another. Any dollar, regardless if it is new and crisp, or old and worn, is worth the same amount. Money must be relatively stable. In addition to serving as a medium of exchange, money also serves as a store of value. You can save money confident that its value is constant.
Explain intrinsic value. Why does our money lack it? Intrinsic value is the value of the materials something is made from. For example, an automobile is made from metal, plastics, rubber, copper and many other materials that all have value outside of being formed into a vehicle. Money, on the other hand, is made from inexpensive materials, costing roughly the same in a dollar bill as in a twenty dollar bill.
Would everyone be better off if we all had more money? Why or why not? No; when people have more money to spend and the volume of goods and services doesnt increase as fast, sellers find that they can raise prices and sell as much as they did before. Inflation is the result of too much money being spent in our economy.
P. 93 #3–17 skip #9 Get your notebook out. Lets go over these questions!!!