Business Unit 2 Flashcards
(35 cards)
allocative efficiency
The provision of the right amount of goods and services, taking into account consumers’ preferences, the production possibilities provided by technology, and the scarcity (and hence price) of each of the production inputs used.
capital
the machines, factories, and infrastructure used to produce output
circ flow model
An economic model showing the interactions that occur in an economy between its two primary decision makers: households and businesses.
comparative advantage
An economic principle, used most in the theory of international trade, which states that a country should specialize in producing those goods where its advantage in productivity and costs, relative to its own productivity and costs in producing other goods, is greatest.
constraints
The resource limitations that scarcity places on production.
demand
the amount of a particular product or service that a consumer is willing and able to buy at a specific price.
diminishing marginal utility
The tendency for the marginal utility associated with each additional incremental unit of the consumption of a good or service to diminish, as the consumer consumes a larger amount of the good or service.
An economic concept stating that using increasing amounts of a particular input (e.g., labor hours) in production beyond a certain level increases output less and less.
diminishing returns
The production of the desired result with the minimum amount of effort, expense, or waste while accounting for the costs and benefits associated with the desired result.
economic efficiency
The degree to which consumer demand of a particular product or service changes when the price of that product or service changes.
elasticity of demand
The combination of vision, initiative, skill, ingenuity, and risk taking needed to launch and sustain a business venture.
entrepreneurship
The marketplace in which factors of production are bought and sold by households and businesses.
factor market
The economic resources needed to produce goods and services. The term is generally used to refer to the very broad categories of land, labor, and capital. It has been suggested by many economists that some other broad categories (notably entrepreneurship, information, and know-how) should also be included as factors of production.
factors of production
The change in a consumer’s demand and consumption caused by lower prices.
income effect
The basic facilities and installations needed for the functioning of a community or society, such as transportation or communications systems, and water and power lines.
infrastructure
The self-correcting characteristic of a market economy where the interaction of supply and demand generally tends to bring the system back to equilibrium.
invisible hand
All human time, effort, and talent that goes into producing goods and services.
labor
Areas of ground used for production (e.g., for farming or manufacturing), together with natural resources found on or under the ground that are used to produce goods and services.
land
The amount of additional production of a good (or service) that results from using one more unit of an input (e.g., hours of labor).
marginal physical product (MPP)
The amount of benefit or satisfaction received from each additional instance of consumption of a good or a service.
marginal utility
The value of the next-best alternative, which was given up when the preferred alternative was chosen.
opportunity cost
The point where the quantity supplied and the amount demanded are equal at the currently prevailing price.
price equilibrium (market clearing price)
The marketplace in which goods and services are bought and sold by households and businesses.
product market
The manufacture of the desired output with the minimum amount of effort, expense, or waste while taking account of the costs and benefits associated with a particular choice of what outputs to produce and what inputs to use in producing them.
production efficiency
