Economic Production and Trade

Vocabulary flashcards based on lecture notes covering economic production, consumption possibilities, standard of living, and diminishing returns.

Consumption Possibilities Curve

A curve that indicates an economy's ability to consume more goods and services than it can produce domestically, situated further to the right than the Production Possibilities Frontier (PPM).

Standard of Living

The degree of wealth and material comfort available to a person or community; it can be improved by the ability to consume more.

Determinants of Standard of Living

Factors that can increase standard of living, including adding more workers (assuming consistent productivity), increasing each worker's productivity, and securing improved terms of trade.

Diminishing Returns

An economic principle suggesting that the first person employed in an industry is the most productive, and subsequent additions of labor or capital yield progressively smaller increases in output.

Concave Production Possibility Frontier

The shape of the Production Possibility Frontier (PPF) that occurs when diminishing returns are present, indicating increasing opportunity costs as production shifts from one good to another.

Comparative Advantage

The ability to produce a good or service at a lower opportunity cost than another producer.