Chapter 2 Terms Flashcards
A table or chart explaining the relationships between pairs of variables
Tabular model (aka schedule)
A graph formed by the plotting of data involving two variables and the connecting of the resulting points to form a line of infinite information from the data
Line graph
A model that enables an economist to see the maximum feasible amounts of two commodities that a business can produce when those items are competing for that business’s limited resources
Production Possibilities Curve (PPC)
A model depicting the flow of economic goods and services between households, business firms, the government, and financial markets
Circular flow model
The total expenditures made by all households
Consumption expenditures
The resources used in producing the nation’s GDP: land, labor, financial capital, and entrepreneurship
Factors of Production
The factor of production denoting all the natural resources that go into the production of goods
Land
The factor of production denoting all human effort that goes into the creation of goods and services
Labor
The tools business firms use to produce goods and services
Capital
The factor of production denoting the activity of creatively combining natural resources, human labor, and financial capital in unique ways to develop new and useful products and services
Entrepreneurship
The payments business firms make in exchange for the four factors of production
Factor Costs
Payment for the use of an owner’s property
Rent
Factor costs involving all payments for labor used to produce goods or services
Wages
An additional charge that a creditor demands from a borrower to cover the expense of the loan and to provide a profit; the factor cost involving the payments made on borrowed money
Interest
Factor costs involving the rewards entrepreneurs receive for successful risk taking
Profit
