Introductory Economics: Trade, PPF, and Specialization

Vocabulary flashcards covering production possibility frontiers, comparative advantage, division of labor, and trade dynamics from the lecture.

Comparative Advantage

The ability to perform an activity or produce a good at a lower opportunity cost than others, serving as the recommended basis for specialization and trade.

Absolute Advantage

A condition mentioned in the lecture that should not be used as the basis for trade, in favor of comparative advantage.

Linear PPF

A visual representation of resource allocation between two activities where the rate of trade-off between them remains constant.

Bowed PPF

A curved visual representation of resource allocation where the rate of trade-off is not constant and depends on the amount being produced due to varying productivity of resources.

Obtainable Point

A production outcome on or within the PPF that can actually be reached because the necessary resources are available.

Unobtainable Point

A production outcome outside the PPF that cannot be reached given current resources, unless made possible through trade.

Efficient Point

A production point situated directly on the PPF curve or line, indicating that all available resources are being fully utilized.

Opportunity Cost

The cost of pursuing a specific action measured by the value of the foregone alternative that must be given up.

Zero-Sum Game

A situation in which one party's gain necessarily results in another party's loss, a concept contrasted with mutually beneficial trade.

Moving Assembly Line

The industrial innovation attributed to Henry Ford in 1906, where the item moves along a line while workers remain in place to perform specific tasks.

Adam Smith's Pin Factory

An example from Wealth of Nations illustrating how dividing pin production into 18 operations allows workers to produce up to 12 pounds of pins ($48,000$ pins) a day instead of fewer than 20 individually.

Creative Destruction

The economic phenomenon where massive waves of new technology eliminate legacy jobs while creating new opportunity and job roles.

Remote Encoding Center (REC)

A United States Postal Service facility located in Salt Lake City where workers decipher unreadable or scribbled envelope addresses.

Exchange Rate

The relative price at which two goods are traded between parties, which must fall strictly between both parties' opportunity costs to be mutually accepted.