Econ 1.1-1.3

Trade-off

When you give something up to get something else.

Scarcity

There is not enough of a resource available to satisfy all of the various ways a society wants to use it.

Factors of production

Land, labor, capital, entrepreneurship.

Land

All resources that come directly from nature.

Labor

The effort of workers.

Capital

Manufactured goods used to make other goods and services.

Entrepreneurship

The ability to combine land, labor, and capital to create goods and services.

Opportunity cost

The value of the next best alternative that you must give up in order to get the item.

Ceteris paribus

All other relevant factors remain unchanged.

Production possibilities curve

A model that helps economists think about the trade-offs necessary in every economy.

Efficient

An economy is efficient if there is no way to make anyone better off without making at least one person worse off.

Economic growth

An increase in the maximum amount of goods and services an economy can produce.

Trade

People provide goods and services to others and receive goods and services in return.

Specialization

Each person specializes in the task that they are good at performing.

Comparative advantage

Someone has a comparative advantage in producing a good or service if their opportunity cost is the lowest among the people who could produce that good or service.

Absolute advantage

Someone has an absolute advantage in producing a good or service if they can make more of it with a given amount of time and resources.