Ch. 2 Trade-off, Comparative Advantage, Market System Flashcards
Scarcity
unlimited wants exceed limited resources
Production Possibilities Frontier (PPF)
curve showing max attainable combinations of two goods that can be produced with available resources and technology
Opportunity Cost
highest-valued alternative that must be given up to engage in an activity
Economic Growth
ability of economy to increase the production of goods and services
Trade
act of buying and selling
Absolute Advantage
ability of an individual, firm, or country to produce more of a good or service than competitors, using same amount of resources
Comparative Advantage
ability of individual, firm, or country to produce a good or service at a lower opportunity cost than competitors
Market
group of buyers and sellers of a good/service and the arrangement by which they trade
Product Markets
market for goods or services
Factor Market
market for factors of production (labor, capital, natural resources)
Factors of Production
inputs used to make goods and services (labor, natural resources, capital)
Circular-flow Diagram
a model that illustrates how participants in markets are linked
Free Market
market with few government restrictions on how a good or service can be produced, sold, or on how factors of production can be employed
Entrepreneur
someone who operates a business bringing together factors of production to produce goods and services
Property Rights
the rights individuals or firms have to the exclusive use of their property, including right to buy and sell
