ch. 2 economic models: trade-offs and trade

production possibility frontier (PPF)

illustrates the trade-offs facing an economy that produces two goods; shows the max quantity of one good that can be produced for any given quantity produced of the other

comparative advantage

the ability to carry out a particular economic activity more efficiently than another activity

absolute advantage

when an individual can produce a good or service better than everyone else

positive economics

the branch of economic analysis that describes the way the economy actually works (definite right or wrong answers)

normative economics

makes recommendations about the way the economy should work