Interdependence is the state of two or more individuals, groups or societies being reliant on each other. This mutual dependence is often derived from a need for individuals, groups or societies to grow, develop, change and/or advance.
Interdependence can lead to a variety of results, both positive and negative. These results can be the same or different for the parties involved in the interdependent relationship. As well, these results can change depending on the time period and location in which the individuals, groups and/or societies exist. Relations of interdependence are not necessarily horizontal. Historiography can also study processes of dependency, domination and power between peoples or nations
Models are simplified simulations of certain aspects of the economy. Models are necessary because the complexity of a real economy makes it difficult to control the necessary variables in order to run experiments. When we construct economic models, we face the challenges of accounting for the complexity of the real economy and the fact that the behaviour of human beings can be unpredictable.
Poverty is a situation in which people are unable to consume at an adequate level.
When people cannot meet their basic needs for survival, such as clothing, food and shelter, they are living in poverty. However, some argue that an adequate level of consumption goes beyond basic necessities, and includes things like education and health care. Therefore, the level of consumption below which poverty occurs is a question for debate.
Power of individuals and of groups can be defined as a capacity to make things happen.
In economics, power is the ability to make choices about what to produce, how to produce it, and who gets the goods that are produced. Power can be more centralized, as in a command economy where economic choices are made by the government, or monopoly/oligopoly situations where economic choices are made by a few large firms. Power can also be decentralized, as in a free market economy where many firms and consumers share power.
Resources are the things we use to make the products that meet our needs and wants. Economists also call them factors of production and place them in four general categories: land, labor, capital and entrepreneurship/management.
Entrepreneurs combine land, labor and capital in different ways in order to produce different goods and services. For example, the owner (entrepreneur) of a fruit and vegetable store combines fruits and vegetables (natural resources/land) with the building in which the store is located (capital) and his or her work and that of his or her employees (labor) to provide a product to consumers (fruit and vegetables available in a convenient location).
A good is scarce when the demand for it is greater than the supply at a price of zero. Charging prices for goods helps us address the problem of scarcity. Scarcity arises from the fact that our needs and wants are unlimited, while the resources available to meet those needs and wants are limited. This forces us to choose which wants and needs to satisfy and which not to satisfy. The wants and needs we do not satisfy represent the costs for those that we do. For example, if we choose to use our resources to make televisions rather than books, then the cost of the televisions is the books we could not make after having used our resources on televisions. This economic understanding of cost is often called “opportunity cost”.
The concept of sustainability implies the notion of living within our means and it is central to an understanding of the nature of interactions between environmental systems and societies.
Sustainability is a state in which we meet our current needs and wants without hurting the ability of future generations to meet theirs. Sustainability can be enhanced by conserving resources (that is not using them to produce goods), finding ways to produce products more efficiently (that is using fewer resources in production), or discovering new resources. Increased consumption in the present may undermine sustainability unless it occurs through more efficient production that uses fewer resources to produce the same products (for example, the energy needed to heat a home requires large quantities of wood but relatively small quantities of natural gas, making natural gas a more sustainable resource choice for this purpose).
Trade is the exchange of goods and services between the various participants in an economy. When people are allowed to trade freely, including across national borders, overall wealth usually grows. However, the gains from this increase in wealth may not be distributed equally. Trade can be limited by various factors including, but not limited to: war and terrorism, natural disasters, government regulations and taxes, control of markets by monopoly firms, and actions by workers such as strikes.