Unit 1: Basic Econmic Concepts Flashcards
Economics
The study of how people make decisions given the resources that are provided to them.
Positive Economics
Based on facts that can be present or disproven using a scientific approach. Ex. The employment rate in France is higher than the United States.
Normative Economics
Personal perspectives or opinions on desirable or undesirable economic situations, and how to improve economic development.
Factors of Production
Land, labor, entrepreneurship, and capital. The inputs needed for the creation of goods and services.
Labor
The effort of workers; the work that people do to produce goods and services.
Entrepreneurship
The process of bringing together the three factors of production(natural, human, and resources). Ex. An individual organizes a business and invests their time and money in hopes of earning a profit.
Physical Capital
The manufactured goods used to make other goods and services.
Human Capital
The experience in training that makes workers more productive and more valuable.
Land
Resources that come from nature, such as timber, wind, and petroleum.
Opportunity Cost
The trade-off of the value of one good or service for the value of another is the opportunity cause of the choice. Ex. the value of the next best alternative that is given up when making a decision.
Comparative Advantage
The ability to produce a good or service at a lower opportunity cost than another producer.
Absolute Advantage
When a person, business, or country can produce more of a good or service than another producer that has the same quantity or resource.
Production Possibilities Curve(PPC)
Illustrates the trade-off and opportunity causes associated with the production of two goods or services. There are different types of PPC’s like: concave(increasing), constant(straight line), economic growth, shrinking economy, factors of production.
Production Possibilities Frontier
Illustrates the combinations of goods produced and how resources are fully utilized.
Constant Curve(Straight Line)
When the opportunity cost remains the same across all production levels.