Chapter 2 Flashcards
Production
Any activity that results in the conversion of resources into products that can be used in consumption.
Scarcity
A situation in which the ingredients for producing the things that people desire are insufficient to satisfy all wants at zero price.
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.
Labor
Productive contributions of humans who work.
Physical capital
All manufactured resources, including buildings, equipment, machines, and improvements to land that are used for production.
Human capital
The accumulated training and education of workers.
Entrepreneurship
The component of human resources that performs the functions of raising capital; organizing, managing, and assembling other factors of production; making basic business policy decisions; and taking risks.
Goods
All things from which individuals derive satisfaction or happiness.
Economic goods
Goods that are scarce, for which the quantity demanded exceeds the quantity supplied at a zero price.
Services
Mental or physical labor or assistance purchased by consumers. Examples are the assistance of physicians, lawyers, dentists, repair personnel, house cleaners, educators, retailers, and wholesalers; items purchased or used by consumers that do not have physical characteristics.
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.
Technology
The total pool of applied knowledge concerning how goods and services can be produced.
Efficiency
The case in which a given level of inputs is used to produced the maximum output possible. Alternatively, the situation in which given output is produced at minimum cost.
Inefficient point
Any point below the production possibilities curve, at which the use of resources is not generating the maximum possible output.
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 accounts for the bowed-out shape of the production possibilities curve.
Consumption
The use of goods and services for personal satisfaction.