Chapter 2 Flashcards
What is the scientific method
Making an observation about the world and devolving a theory to explain it
What is a model
A simplified representation of a more complicated reality
Practice drawing the circular flow diagram
Practice
Practice
Do it
Now
Who are the decision makers in the circular flow diagram
Households and businesses
What are factors of production
Any resource used to produce a good or service. Example: labour, land, capital
What is “capital”
Anything human made that is used to produce a good or service
Ex: Computers, tools, trucks, factories
What do households own and consume
Own all the factors of production and consume the goods and services that businesses produce
In the market of goods and services, who are the buyers and who are the sellers?
The households are the buyers; they buy the output of goods and services produced by a business
The businesses are the sellers
In the market for factors of production, who are the buyers and who are the sellers?
Businesses are the buyers
Households are the sellers; they provide the inputs that businesses use to produce goods and services
What are inputs
Resources businesses use in production
What are outputs
Goods and services that businesses sell
What is the production possibilities frontier
A graph that shows the possible combinations of two goods that can be produced given the current technology and available factors of production
What makes an outcome efficient
If an economy is getting the most it can get out of its scarce resources
What happens at an efficient point on the production possibilities frontier
The only way to make more of one good is to make less of another good
What does the opportunity cost equal on the production possibilities frontier
The slope
