Trade-Offs and Trade

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12 Terms

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Goods and Services

Things people value and produce to satisfy wants.

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Factors of production

Land, Labor, Capital, Entrepreneurship

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Production efficiency

When it is not possible to produce more of one good or service without producing less of something else.

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Production inefficiency

Wasting resources.

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Opportunity cost

The value of what is given up when choosing the next best thing

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PPF (Production Possibility Frontier)

A description of the limits to what can be produced given the available resources and technologies.

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Economic growth

The expansion of production and possibilities.

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Comparative advantage

When someone can produce a good at a lower opportunity cost.

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Absolute advantage

When someone is more productive than others and can outperform in many activities.

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Market

Any arrangement that brings buyers and sellers together.

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Market Price

Coordinates the choices made by buyers and sellers of a good.

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Households, Firms

Economic life is organized by 2 categories