Exam 1 Review Flashcards
Vocab from Units 1-3
Economy
the organization of people who are producing and consuming goods and services
Economics
the study of how individuals manage scarce resources
PPF
Production possibilities frontier-model that demonstrates the trade-offs in production of goods and services
Capital goods
a good purchased and used by a consumer
Absolute advatage
a situation in which one can produce more goods and services than another
Trade offs
giving up one thing to obtain another
Efficiency
using all factors of production completely - on PPF
Specialization
the process in which one focuses on producing a limited variety of goods and services
Inefficiency
not using all factors of production completely - inside PPF
Consumption good
a good purchased to produce other goods and services
Micro economics
the study of how individuals make decisions, how the decisions interact with others, and how government policy affects these decisions
Comparative advantage
a situation in which one can produce at a lower opportunity cost than another
3 Factors of production
land, labor, capital
Human capital
knowledge and skills that one possesses that makes them more productive at work
Income
money gained from allowing others to use our factors of production
