Economics Today: Chapter 2 - Scarcity and Trade-Offs

A set of vocabulary flashcards summarizing key concepts from Chapter 2 on scarcity and trade-offs in economics.

Scarcity

The fundamental economic problem arising from the gap between limited resources and theoretically unlimited wants.

Opportunity Cost

The highest-valued, next-best alternative that must be sacrificed to obtain something or to satisfy a want.

Trade-Offs

The balance between the benefits and drawbacks of choices when resources are limited.

Production Possibilities Curve (PPC)

A graphical representation that shows the maximum combinations of goods that can be produced given fixed resources.

Absolute Advantage

The ability to produce more of a good or service than another person or nation using the same amount of resources.

Comparative Advantage

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

Production

Any activity that converts resources into products that can be used in consumption.

Factors of Production

Inputs used to produce goods and services, including land, labor, capital, and entrepreneurship.

Economic Goods

Scarce goods for which the quantity demanded exceeds the quantity supplied at zero price.

Capital Goods

Goods used to produce other goods, as opposed to goods produced for personal satisfaction.

Efficiency

Producing the maximum output with given technology and resources at minimum cost.

Law of Increasing Additional Cost

As society attempts to produce more of a good, the opportunity cost of additional units generally increases.

Specialization

The organization of economic activity among different individuals and regions, leading to greater productivity.

Consumer Goods

Goods produced for personal satisfaction.

Economic Growth

An increase in the production possibilities of an economy, illustrated by an outward shift of the PPC.

Human Capital

The accumulated training and education of workers.

Entrepreneurship

The ability to combine resources and take risks to create goods and services.