Chapter 2 Flashcards
Goods and Services
Outputs of production
Factors of Production
Inputs in the production process
Land
Labor
Capital
Production
the process in which inputs (resources) become outputs (Goods & Services)
Firms
Decision making entities whose sole goal is to to provide goods and services to households
Housholds
decision making entities whose sole goal is to obtain goods and services
3 Fundamental Economic Questions
- )What to produce?
- )How to produce it?
- )Who to sell it to?
Production Decision
what specific production combination will we produce?
Resource use decision
which resources will be used to make goods and services
distribution decision
Who gets to consume the made products and services
Production Possibilities Frontier (PPF)
A curve that summarizes the limits of production by illustrating trade off
Attainable Output combination
a combination of goods that a society can produced with there current resources and technology
On or Below PPF
Unattainable Output combination
a combination of goods that cannot be produced by a society with its current resources and technology
Beyond the PPF
Productive Efficiency
A situation in which making more of one good would directly result in the decreased production of another
Situations on the PPF
Production Inefficiency
A situation in which making more of one good does NOT directly result in the decreased production of another.
Situations below the PPF
Absolute Advantage
when one person can produce more outputs than another using the same amount of inputs
