Chapter 3 Flashcards
Why do we use dollars?
To keep track of economic activities
In what two ways is value created?
Production and trade
Production Process…
Making inputs consumable outputs
4 Types of Resources/Inputs
- Natural Resources/land (Cost: Rent)
- Labor (Cost: Wage)
- Capital (Cost: Interest)
- Entrepreneurship (Cost: Profit)
Technology
The way that inputs are combined to produce output
Make Work Fallacy
Idea that jobs are valuable, whether or not production adds value
Production Possibilities Frontier (PPF) assumes…
- two goods are produced over time period
- fixed amount of resources are used
- given technology is used
Law of Increasing Opportunity Cost (LIOC)
As more of one good is produced, opportunity cost of producing the unit increases, in terms of the other good sacrificed.
When trading off two goods, LIOC doesn’t mean…
PPF slopes upward, but marginal cost cure does.
Economic Growth
Expansion of an economy’s productive capabilities
Income and Wealth depend on…
- Resource quantity
- Resource quality
- Freedom to use resources
Human Capital
Upgrading labor by education and training
Invisible Hand
Intending only ones gain
Those trying to only help themselves often help others more
Public Services
Regulated by law, outlives its usefulness
Private Services
Voluntary, individual, responsibility, everyone gives and receives what one wishes
