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Scarcity

A situation in which the ingredients for producing the things that most people desire are insufficient to satisfy all wants at a zero price.

1

Production

Any activity that results in the conversion of resources into products that can be used in consumption.

2

Land

The natural resources that are available from nature. Land as a resource includes location, original fertility and mineral deposits, topography, climate, water, and vegetation.

3

Labor

Productive contributions of humans who work.

4

Physical capital

All manufactured resources, including buildings, equipment, machines, and improvements to land that are used for production.

5

Human capital

The accumulated training and education of workers.

6

Entrepreneurship

The component of human resources that performs the function of raising capital; organizing, managing, and assembling other factors of production; making basic business policy decisions; and taking risks.

7

Goods

All thinks from which individuals derive satisfaction of happiness.

8

Economic goods

Goods that are scarce, for which the quantity demanded exceeds the quantity supplied at a zero price.

9

Service

Mental of physical labor or assistance purchased by consumers. Examples are the assistance of physicians, lawyers, dentists, repair personnel, house cleaners, educators, retailers, and whole salers; items purchased or used by consumers that do not have physical characteristics.

10

Opportunity cost

The highest- valued, next- best alternative that must be sacrificed to obtain something or to satisfy a want.

11

Production possibilities curve (PPC)

A curve representing all possible combinations of maximum outputs that could be produced, assuming a fixed amount of productive resources of a given quality.

12

Technology

The total pool of applied knowledge concerning how goods and services can be produced.

13

Efficiency

The case in which a given level of input is used to produce the maximum output possible. Alternately, the situation in which a given output is produced at a minimum cost.

14

Inefficient point

Any point below the production possibilities curve, at which the use of resources is not generating the maximum possible output.

15

Law of increasing additional cost

The fact that the opportunity cost of additional units of a good generally increases as people attempt to produce more of that good. This account for the bowed-out shape of the productions possibilities curve.

16

Consumption

The use of goods and services for personal satisfaction.

17

Specialization

The organization of economic activity so that what each person (or region) consumes is not identical to what that person (or region) produces. An individual may specialize, for example, in law or medicine. A nation may specialize in the production of coffee, e-book readers, or digital cameras.

18

Comparative advantage

The ability to produce a good or service at a lower opportunity cost compared to other producers.

19

Absolute advantage

The ability to produce more units of a good or service using a given quantity of labor or resource inputs. Equivalently, the ability to produce the same quantity of a good or service using fewer units of labor or resource inputs.

20

Division of labor

The segregation of resources into different specific tasks. For instance, one automobile worker puts on bumpers, another doors, and so on.