Economics: Chapter 2

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Last updated 3:31 AM on 9/23/26
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23 Terms

1
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Chapter 2 Page 19

Goods

Def: Physical objects that can be produced for sale or use. Three examples are food, clothing, and cars.

<p>Def: Physical objects that can be produced for sale or use. Three examples are food, clothing, and cars.</p>
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Chapter 2 page 19

Services

Def: Actions or activities that are performed for a fee (usually money)

<p>Def: Actions or activities that are performed for a fee (usually money)</p>
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Chapter 2 Page 20

Factors of Production

Def: The resources used to produce goods and services. Economists define these resources as land, labor, and capital (sometimes entrepreneurship).


<p>Def: The resources used to produce goods and services. Economists define these resources as land, labor, and capital (sometimes entrepreneurship).</p><p></p>
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Chapter 2 Page 23

Capital (Physical Capital or Capital Goods)

Def: The tools, machines, and buildings used to produce goods and services.


<p>Def: The tools, machines, and buildings used to produce goods and services.</p><p></p>
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Chapter 2 Page 20

Land

Def: The "gifts of nature" that are used to produced goods and services. They may include natural resources like air, soil, minerals, and water.

<p>Def: The "gifts of nature" that are used to produced goods and services. They may include natural resources like air, soil, minerals, and water.</p>
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Chapter 2 Page 22

Labor

Def: The time and effort people devote to producing goods and services in exchange for wages. It can include both physical labor and mental activity.


<p>Def: The time and effort people devote to producing goods and services in exchange for wages. It can include both physical labor and mental activity.</p><p></p>
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Chapter 2 Page 20

Entrepreneurship

Def: The willingness to take the risks involved in starting a business.


<p>Def: The willingness to take the risks involved in starting a business.</p><p></p>
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Chapter 2 Page 25

Opportunity Cost

Def: The value of the next best alternative that is given up when making a choice. This is the measure of what you must give up to get what you most want.


<p>Def: The value of the next best alternative that is given up when making a choice. This is the measure of what you must give up to get what you most want.</p><p></p>
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Chapter 2 Page 24

Productivity

Def: A measure of the efficiency with which goods and services are produced. Productivity is often stated as the quantity produced per person per hour.


<p>Def: A measure of the efficiency with which goods and services are produced. Productivity is often stated as the quantity produced per person per hour.</p><p></p>
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Chapter 2 Page 28

Production Possibilities Frontier (PPF) or PPC (Production Possibilities Curve)

Def: A simple model of an economy that shows all the combinations of two goods that can be produced with the resources and technology currently available.


<p>Def: A simple model of an economy that shows all the combinations of two goods that can be produced with the resources and technology currently available.</p><p></p>
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Chapter 2 Page 29

Economic Efficiency

Def: The result of using resources in a way that produces the maximum amount of goods and services.


<p>Def: The result of using resources in a way that produces the maximum amount of goods and services.</p><p></p>
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Chapter 2 Page 19

Shortage

Def: Lack of something that is desired, a condition that occurs when there is less of a good or service available than people want at a current price.


<p>Def: Lack of something that is desired, a condition that occurs when there is less of a good or service available than people want at a current price.</p><p></p>
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Chapter 2 Page 20

Inputs

Def: The scarce resources that go into the production process.


<p>Def: The scarce resources that go into the production process.</p><p></p>
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Chapter 2 Page 20

Outputs

Def: The goods and services produced using the factors of production.


<p>Def: The goods and services produced using the factors of production.</p><p></p>
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Chapter 2 Page 20

Production Equation

Def: Represents the process of combining resources (inputs) to produce goods and services (outputs).


<p>Def: Represents the process of combining resources (inputs) to produce goods and services (outputs).</p><p></p>
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Chapter 2 Page 21

Renewable Resources

Def: Natural resources, like forests, fresh water, and fish, that can be replaced as they are used.


<p>Def: Natural resources, like forests, fresh water, and fish, that can be replaced as they are used.</p><p></p>
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Chapter 2 Page 21

Nonrenewable Resources

Def: A natural resource that cannot be replaced once it is used like oil and coal.


<p>Def: A natural resource that cannot be replaced once it is used like oil and coal.</p><p></p>
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Chapter 2 Page 22

Human Capital

Def: The knowledge and skills people gain from education, on-the-job training, and other experiences.


<p>Def: The knowledge and skills people gain from education, on-the-job training, and other experiences.</p><p></p>
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Chapter 2 Page 22

Financial Capital

Def: Money used for investment or production.


<p>Def: Money used for investment or production.</p><p></p>
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Chapter 2 Page 24

Total Utility

Def: The total amount of satisfaction or pleasure one gets from consuming a specific amount/number of a good or service.


<p>Def: The total amount of satisfaction or pleasure one gets from consuming a specific amount/number of a good or service.</p><p></p>
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Chapter 2 Page 26

Marginal Utility

Def: The extra satisfaction or pleasure achieved from an increase of one additional unit of a good or service.


<p>Def: The extra satisfaction or pleasure achieved from an increase of one additional unit of a good or service.</p><p></p>
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Chapter 2 Page 27

Law of Diminishing Marginal Utility

Def: The general observation that as the quantity of a good or service consumed increases, the benefits for the consumer of each additional unit decrease.


<p>Def: The general observation that as the quantity of a good or service consumed increases, the benefits for the consumer of each additional unit decrease.</p><p></p>
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Chapter 2 Page 26

Negative Utility

Def: A lack of pleasure or satisfaction from consuming a product or service or taking an action; the opposite of utility.


<p>Def: A lack of pleasure or satisfaction from consuming a product or service or taking an action; the opposite of utility.</p><p></p>