CH 2 Flashcards
Factors of production
The resources available to the economy for the production of goods and services
Utility
The value, or satisfaction, that people derive from the goods and services they consume and the activities they pursue
Labor
The human effort used to produce a good
Capital
Something that is used to produce a good (basically a tool)
Natural Resources
Resources from nature used to make a good
Human capital
The skills a worker has as a result of education, training, or experience that can be used in production
Financial Capital
Includes money and other “paper” assets (such as sticks and bonds) that represent claims on future payments
Technology
The knowledge that can be applied to the production of goods and services
Entrepreneur
A person who, operating within the context of a market economy, seeks to earn profits by finding new ways to organize factors of production
Firm
A company that combines factors of production to produce goods
Sole Proprietorship
A firm owned by one individual
Partnership
A firm owned by several individuals
Corporation
A firm owned by shareholders who own stock in a firm
Production Possibilities Curve
A graph used to represent the different options of goods an economy can produce
Comparative Advantage
In producing a good or service, the situation that occurs if the opportunity cost of producing that good or service is lower for that economy than for any other
Law of Increasing Opportunity Cost
As an economy moves along its production possibilities curve in the direction of producing more of a particular good, the opportunity cost of additional units of that good will increase
Full Employment
The full use of factors of production
Efficient Production
When an economy is operating on its production possibilities curve
Inefficient Production
Utilizes factors of production wrong by sacrificing more opportunity cost (functions INSIDE the curve)
Specialization
When an economy is producing goods at a comparative advantage
Economic Growth
The growth of an economy, causing a shift in the production possibilities curve
What can result in Economic Growth?
Increase in physical quantity, increase in quality of factors of production, or technological gain
Market Capitalist Economy
Resources are generally owned by private individuals who have the power to make decisions about their use (U.S, U.K, Chile, Hong Kong)
Command Socialist Economy
The government is the primary owner of capital and natural resources and has broad power to allocate the use of factors of production (North Korea, Cuba)
Mixed economies
Combines aspects of market capitalist and of command socialist economic systems (France, Germany, Sweden)
