Chapter 3 Flashcards
Production process is
turning inputs into consumable outputs
Consumable outputs are
goods and services
ex of Resource/ Input is Natural Resources/ Land, which are…
Tangible, but not produced by anyone
Price: Rent
Resource/ Input: Labor
Physical and mental talents, applied to production
Price: Wage
Resource/ Input: Capital
Produced means of production
Price: Interest
Resource/ Input: Entrepreneurship
Risk taking/risk bearing and innovation
Price: Profit
What is Technology?
The way that inputs are combined to produce output
What is the Make Work Fallacy?
The idea that jobs are valuable, whether or not the labor’s production adds value
Production Possibilities Frontier Model (PPF)
- Only two goods are produced over some time period
- Using some fixed amount of resources
- And a given technology
What is the law of increasing opportunity cost (LIOC)?
as more of one good is produced, the opportunity cost of producing a unit of that good rises, in terms of the other good which must be sacrificed.
economic growth is
an expansion of an economy’s productive capabilities
Income and wealth depend on
- quantity of resources
- quality of resources
- freedom to use those resources
Human Capital
Individuals upgrade their labor by education and training
