Chapter 2 Flashcards
(23 cards)
The physical and human effort used in the production of goods and services
Labor
The natural resources used in the production of goods and services
Land
The equipment and structures used to produce goods and services
Capital
The process of combining labor, land, and capital to produce goods and services
Entrepreneurship
Items we value or desire
Goods
Items we value or desire that we can reach out and touch
Tangible goods
Goods that we cannot reach out and touch, such as friendship and knowledge
Intangible goods
Intangible items of value provided to consumers, such as education
Services
Scarce goods created from scarce resources– goods that are desirable but limited in supply
Economic goods
Items that we do not desire or want, where less is preferred to more, like terrorism, smog, or poison oak
Bads
The value of the best forgone alternative that was not chosen
Opportunity cost
Focusing on the additional, or marginal, choices; marginal choices involve the effects of adding or subtracting, from the current situation, the small (or large) incremental changes to a plan of action
Marginal thinking
Individuals will pursue an activity if the expected marginal benefits are greater than the expected marginal costs
Rule of rational choice
The difference between the expected marginal benefits and the expected marginal costs
Net benefit
An incentive that either reduces costs or increases benefits, resulting in an increase in an activity or behavior
Positive incentive
An incentive that either increases costs or reduces benefits, resulting in a decrease in the activity or behavior
Negative incentive
Concentrating in the production of one, or a few, goods
Specialization
Occurs when a person or country can produce a good or service at a lower opportunity cost than others
Comparative advantage
When an economy gets the most out of its scarce resources
Efficiency
Government mandated minimum or maximum prices
Price controls
When the economy fails to allocate resources efficiently on its own
Market failure
The economy’s abilities to produce more goods and services
Economic growth
Output per worker
Productivity
