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Details Title: Chapter 2 Key Terms Description: Vocabulary for Chapter 2 of CASE & FAIR Total Flash Cards: 27 Created: 01/24/2007 00:15:48	To study from this set of flash cards, or to create your own your own study flash cards, register HERE. If you are already a registered user, CLICK HERE.
Cards Term capital Definition things that are themselves produced and that are then used in the production of OTHER goods and services. Term factors of production (or factors) Definition the inputs into the process of production, aka resources Term production Definition the process that transforms scarce resources into useful goods and services Term inputs (or resources) Definition anything provided by nature or previous generations that can be used directly / indirectly to satisfy human wants Term outputs Definition usable products Term opportunity cost Definition the best alternative that we give up when we make a choice or decision Term theory of comparative advantage Definition Ricardo's theory that specialization and free trade will benefit all trading parties, even those that may be absolutely more efficient producers Term absolute advantage Definition a producer has an absolute advantage over another in the production of a good or service if it can produce that product using fewer resources Term comparative advantage Definition a producer has a comparative advantage over another in the production of a good or service if it can produce that product at a lower opportunity cost Term consumer goods Definition goods produced for present consumption Term investment Definition the process of using resources to produce new capital Term production possibility frontier (ppf) Definition a graph that shows all the combinations of goods and services that can be produced if all of society's resources are used efficiently Term marginal rate of transformation (MRT) Definition the slope of the production possibility frontier (ppf) Term economic growth Definition an increease in the total output of an economy. it occurs when a society acquires new resources or when it learns to produce more using existing resources Term command economy Definition an economy in which a central government either directly or indirectly sets output targets, incomes, and prices Term laissez-faire economy Definition "allow them to do"; an economy in which individual people and firms pursue their own self-interests without any central direction or regulation Term market Definition the institution through which buyers and sellers interact and engage in exchange Term consumer sovereignty Definition the idea that consumers ultimately dictate what will (or will not) be produced by choosing what to purchase (and what not to purchase) Term free enterprise Definition the freedom of individuals to start and operate private businesses in search of profits Term resources Definition products of nature, or things like buildings or equipment, or human workforce with people's talents, skills, and knowledge Term capital Definition anything that has already been produced that will be used to produce other valuable goods Term law of increasing oppportunity cost Definition when over time, the opportunity cost to produce certain outputs increases Term innovation Definition the discovery and application of new, more efficient production techniques Term income Definition the amount that a household earns each year Term wealth Definition amount that households have accumulated out of past income through saving or inheritance Term wage rates Definition prices of various kinds of labor Term price theory Definition another name for microeconomic theory