exam 1 Flashcards
law of increasing opportunity cost
states that each time the same decision is made in resource allocation, the opportunity cost will stay the same.
economics
study of how people, institutions and society make economic choices given SCARCE RESOURCES
factors of production
also known as “inputs” are what is used in the production process to produce and “output” or a product
land, labor, capital, entrepreneural ability
production possibilities model
illustrates concepts of scarcity, opportunity cost, efficiency, inefficiency, economic growth, and contractions
market system
private ownership
example, America
division of labor
workers doing tasks best suited to them instead of learning something new
advantages of using capital (machinery)
producers operate more efficiently and can produce more
advantages of specialization
workers choose work according to what they are already good at according to their natural aptitudes (skills) and will perfect these skills
why is exchange the necessary consequence of specialization?
specialization reduces self-sufficiency and results in product surplus.
surplus of one good is exchanged for the surplus of other goods
characteristics of market system
-private property
-freedom of enterprise/choice
-self interest
-use of money
-competition
why is private property and the protection of property rights cooperate
encourages investment, innovation, and economic growth
command system
public ownership
example, North Korea
