Lec 2 - Production Possibilities Frontiers & Economics Problem
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10 Terms
production possibilities frontier (PPF)
curve showing the maximum attainable combinations of goods that can be produced with available resources and technology
economic growth
ability of the economy to increase the production of goods and services
circular-flow diagram
model that illustrates how participants in markets are linked
household → firms
provides factors of production
pay money to firms for goods and services
firms → households
provides goods and services
pay money to household for factors of production
economic model simplified of what reality
no government
no financial system
no foreign buyers and sellers of goods
free market
market with few government restrictions on how a good or service can be produced or sold, or on how a factor of production can be employed
invisible hand
allows individual responses to collectively end up satisfying the wants of consumers
entrepreneur
someone who operates a business, bringing together the factors of production to produce goods and services
entrepreneurs 2 contributions to economic growth
responding to consumer demand
introducing new products