Week 3 Intro to Econ

Comparative advantage

a person can benefit the most from trade by producing a good at a lower cost than their competitors; lower opportunity cost = [this term]

Absolute advantage

producing a good better than competitors using the same or less resources

Opportunity cost

what you have to give up to buy what you really want; what is lost when choosing one option over another

Specialization

complete production of more goods/services; one can have [this term] without specialization

Technology

using inputs to make outputs, converting factors of production into products; uses either labor intensivity or energy intensivity or capital intensivity (typically less labor, more energy)

Dominated technology

another technology can produce the same amount of output using less of at least one input; not efficient

Undominated technology

no other technology is strictly better; most efficent technique

Iscost line (formula)

B = pC + wL (budget = price x capital + wage x labor); rewritten: C = B/p - (w/p) x L

Slope of isocost line

-w/p (-wage / price of capital)

Capitalism

private businesses and individuals own land and factories to produce profit by selling

Division of labor

specialization within a firm or society

Markets

supply and demand; increase productivity and allow firms for benefit creating comparative advantage