Chpt 2: Trade-offs, Comparative Advantage, and the Market System Flashcards
Production Possibilities Frontier (PPF)
A curve showing the maximum attainable combinations of two goods that can be produced with available resources and current technology
Trade-off
The idea that, because of scarcity, producing more of one good or service means producing less of another good or service
Capital Stock
The amount of machinery and other physical capital available in an economy
Economic Growth
The ability of an economy to produce increasing quantities of goods and services
Trade
The act of buying and seling
Absolute Advantage
The Ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources
Comparative Advantage
The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors
Product Markets
Markets for goods - Such as computers - or services - such as medical treatment
Factor Markets
A market for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability
Factors of production
Labor, capital, natural resources, and other inputs used to make goods and services
Circular-Flow Diagram
A model that illustrates how participants in the markets are linked
Free Market
A market with few government restrictions on how goods or service can be produced or sold or on how a factor of production can be employed
Entrepreneur
Someone who operates a business, bringing together the factors of production - labor, capital, and natural resources - to produce goods or services
Property Rights
The rights individuals or businesses have to the exclusive use of their property, including the right to buy or sell it
Economic Growth
The ability of an economy to produce increasing quantities of goods and services
