Chapter 2 Flashcards
Production
any activity that results in the conversion of resources into products that can be used in consumption
Scarcity
A situation in which the ingredients for producing the things that people desire are insufficient to satisfy all wants
Land
The natural resources that are available from nature. Land as a resource includes location, original fertility and mineral deposits, topography, climate, water and vegetation.
Labor
Productive contributions of humans who work, involving both mental and physical activities
Physical capital
All manufactured resources, including buildings, equipment, machines, and improvements to land that are used for production
Human capital
The accumulated training and education of workers
Entrepreneurship
The component of human resources that performs the functions of raising capital, organizing, managing, and assembling other factors of production, making basic business policy decisions, and taking risks
Goods
All things from which individuals derive satisfaction or happiness
Economic goods
Goods that are scarce, for which the quantity demanded exceeds the quantity supplied at a zero price
Services
Mental or physical labor or help purchased consumers. Examples are the assistance of physicians, lawyers, dentists, repair personnel, house cleaners, educators, retailers, and wholesales; items purchased or used by consumers that do not have physical characteristics
Opportunity cost
The highest-valued, next-best alternative that must be sacrificed to obtain something or to satisfy a want
Production possibilities curve (PPC)
A curve representing all possible combinations of maximum outputs that could be produced assuming a fixed amount of productive resources of a given quality
Technology
Society’s pool of applied knowledge concerning how goods and services can be produced
Efficiency
The case in which a given level of inputs is used to produce the maximum output possible. Alternatively, the situation in which a given output is produced at minimum cost
Inefficient point
Any point below the production possibilities curve at which the use of resources is not generating the maximum possible output
Law of increasing relative cost
The fact that the opportunity cost of additional units of a good generally increases as society attempts to produce more of that good. This accounts for the bowed-out shape of the production possibilities curve
Consumption
The use of goods and services for personal satisfaction
Specialization
The organization of economic activity so that what each person (or region) consumers is not identical to what that person (or region) products. An individual may specialize, for example, in law or medicine. A nation may specialize in the production of coffee, computers, or cameras
Comparative advantage
Other ability to produce a good or service at a lower opportunity cost compared to other producers
Absolute advantage
The ability to produce more units of a good or service using a given quantity of labor or resource inputs. Equivalently, the ability to produce the same quantity of a good or service using fewer units labor or resource inputs.
Division of labor
The segregation of are source into different specific tasks; for example, one automobile worker puts on bumpers, another doors, and so on
