Studied by 14 people
Scarcity
occurs because unlimited desire for goods and services exceeds limited ability to produce them due to constraints on time and resources
Resources
capital, labor, entrepreneurship, natural resources
(also referred to as inputs or factors of production)
Labor
physical and mental effort of people
Human capital
knowledge and skill from training and experience
Entrepreneurship
ability to identify opportunities and organize production, and willingness to accept risk to pursue rewards
Economics
study of how societies allocate scarce resources among competing ends
Positive economics
describes the way things
Normative economics
way things should be
Opportunity cost
value of the best alternative sacrificed compared to what actually takes place
Production-possibilities frontier
illustrates the opportunity cost of making one good rather than another one
Efficency
all resources are used productively
Slope
Greater absolute value of slope = greater opportunity cost
Consumer goods
products for sale in a retail or consumer market used directly by consumers
Capital goods
things purchased to produce other goods
Specialization
particular area where a person concentrates in or has expertise in
Division of labor
allows people to develop expertise in certain tasks, where practice improves performance
Absolute advantage
when a country can produce a good using fewer resources per unit of output compared to another country
Comparative advantage
when a country can produce a good at a lower opportunity cost compared to another country
Consumption-possibilities frontier
With trade, countries can have a consumption possibilities frontier that exceeds its own production possibilities frontier
Cost-benefit analysis
comparing value of cost vs. benefits
Distributive efficiency
those who place the highest relative value on goods should receive them
Marginal rate of substitution
ratio of marginal utility for two goods
Note 
Flashcard (50)