BA110: Principles of Economics Ch. 2

Production Possibilities Model

a graph that shows the maximum production outcome of goods and services

Economic System

how a society uses its goods and services in an organized way.

ex: United States economy

Factors of Production

resources that are needed for production for goods and services

ex: land, labor, capital

Utility

the value or satisfaction that people get from consuming goods and services and engaging in activities

ex: park, playground, basketball court

Capital

the resource that’s being used in a factor of production

Market Capitalist Economy

resources are mostly owned by private individuals, who make decisions about how to use them.

ex: small business or stock market

Command Socialist Economy

the government owns most of the capital and natural resources and controls how they are used.

ex: North Korea, Cuba

Production Possibilities Curve

a graph that shows the goods an economy is capable of producing

Labor

the human effort, including physical and mental work, that is used in the production of goods and services.

Human Capital

The skills, knowledge, and experience a worker gains through education, training, or experience that contribute to their productivity

Financial Capital

money or stocks/bonds that will be invested in or funded for production of goods and services

Natural Resources

found in nature without any human alteration.

can be used in the production of goods and services.

Comparative Advantage

if an economy can make a good or service at a lower cost than others