Principles of Economics 3e Chapter 2 CHOICE IN A WORLD OF SCARCITY

Productive Efficiency

A situation where all resources are being used effectively along a Production Possibilities Frontier (PPF).

Production Possibilities Frontier (PPF)

A curve depicting all maximum output possibilities for two goods, given a set of inputs.

Comparative Advantage

The ability of a country to produce a good at a lower opportunity cost than another country.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Invisible Hand

The concept that individuals' self-interested behavior can lead to positive social outcomes, as identified by Adam Smith.

Self-Interest in Economics

The notion that individuals act in their own benefit, which may not necessarily apply to all aspects of life.

Normative Statements

Statements that express opinions or how the world should be, often subjective.

Positive Statements

Statements that describe the world as it is, based on facts.

Economic Analysis

A method of analyzing decision-making processes using economic principles, despite potential deviations from expected behavior.