The Economic Problem: Scarcity And Choice Flashcards
Things that are themselves produced and that are then used in the production of other goods and services
Capital
Factors of production
Production
Inputs
Outputs
Production
Process that transforms resources into useful goods and services
Provided by nature or previous generations
Inputs
Output
Usable products
Constrained optimization
Constrained choice
Scarcity
Introduced by David Ricardo, a major 19th century British Economist
Theory of Comparative Advantage
Specialization and free trade will benefit all trading parties
Theory of Comparative Advantage
Can produce product user fewer resources
Absolute advantage
Comparative advantage
Can produce product at a lower opportunity cost
Anything that has already been produced that will be used to produce other valuable goods or services
Capital goods
Goods produced for present consumption
Consumer Goods
Goods produced for present consumption
Consumer Goods
The process of using resources to produce new capital
Investment
Graph that shows all the combinations of goods and services that can be produced if all of society’s resources are used efficiently
The Production Possibility Frontier (PPF)
