Ch. 2 Flashcards
Goods and services which are of value to households
Output
Anything provided by nature or by previous generation that is used up to produce output; Capital is type of Input which is produced to be used in production of other goods
Factors of Production or Inputs or Resources
Process of transforming scarce inputs or resources into useful goods and services
Production
Scarcity, Choice, Opportunity costs
One person Economy
Specialization and Exchange (To Cooperate or not?)
Two person Economy
Production of a good or service if he/she can produce that product using fewer resources (a lower absolute cost per unit)
Absolute Advantage
Production of a good or service if he/she can produce that product at a lower opportunity cost
Comparative Advantage
Specialization and free trade will benefit all trading parties, even those that may be “absolutely” more efficient producers
Ricardo’s theory
Goods produced for present consumption (food, clothing, toys etc)
Consumer Goods
Goods which are produced to be used in production of consumer goods in future (heavy machinery, roads, house, plantation seeds etc)
Capital Goods
Process of using resources to produce new capital
Investment
Graph that shows all combinations of goods and services that can be produced if all of society’s resources are used efficiently; Can illustrate concepts like scarcity, choice, efficiency/ inefficiency and opportunity costs
Production Possibility Frontier (ppf)
Slope of production possibility frontier; amount of one good that needs to be sacrificed to get an extra unity of another good
Marginal Rate of Transformation
Opportunity cost of producing one good increase as more of it is produced
Law of Increasing Opportunity Cost
Increase in total output of an economy; growth occurs when society acquires more resources or learns to produce more using existing resources
Economic Growth
