Chapter 2 Flashcards
Production possibilities curve
The potential total output combinations of any two goods for an economy, given the inputs and technology available to the economy.
Efficiency
Getting the most from society’s scarce resources
Law of increasing opportunity cost
As more of one item is produced by an economy, the opportunity cost of additional units of that product rises
Generating economic growth
◦Invest more resources for the future
◦ Capital goods expand the ability to produce in the future.
◦ To grow, produce fewer consumer goods, more capital goods.
◦ Sacrifice some current consumption to increase future consumption
Buyers
Determine the demand side of the market
Sellers
Determine the supply side of the market
Market
The process of buyers and sellers exchanging goods and services
Market system
Method of allocating resources among competing uses
Competitive market
Where many buyers and sellers have very little market power
Property rights
Give individuals incentive to maintain, improve, and conserve their property to preserve or increase its value
Market failure
When the economy fails to allocate resources efficiently on its own
Product markets
The markets for consumer goods and services
Factor (input) markets
the market where households sell the use of their inputs (capital, land, labour, and entrepreneurship) to firms
Goods and services flow
The continuous flow of inputs and outputs in an economy
Income flow
the continuous flow of income and expenditure in an economy
