Week 2 Flashcards
The value of the next best alternative that must be given up.
Opportunity Cost
Can only be identified by the individual making the choice.
Subjective
Time, circumstances, and alternatives.
Constraints
A cost that has been incurred and cannot be recovered.
Sunk Cost
Focus on what you can produce with the lowest opportunity cost.
Law of Comparative Advantage
Ability to produce using fewer resources.
Absolute Advantage
When resources are wasted, or when production levels are lower than their potential.
Inefficiency
The ability to produce something at a lower opportunity cost than other producers face.
Comparative Advantage
The direct exchange of one product for another without using money
Barter
Using resources to their fullest.
Efficiency
Focuses on how individuals choose to use their scarce resources to satisfy their unlimited wants
Economy’s Production
Outward shift in the PPF from more resources or technology.
Economic Growth
A curve showing alternative combinations of goods that can be produced when available resources are used efficiently. It’s a boundary line between inefficient and attainable combinations
Production Possibilities Frontier (PPF)
Causes of Inefficient Production Lines (5 examples yon)
- Machine Quality and Performance
- Employee Knowledge and Performance
- Product Quality
- Schedule Gaps
- Lack of Sustainable Processes
What Can Shift the PPF (examples)
Resource Changes
Technological Advancements
Changes in Rules of the Game
The set of mechanisms and institutions that resolve the “what, how, and for whom” questions of production. (What to produce, How to produce, For whom to produce)
Economic System
