Term
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Definition
| any simplified representation of reality that is used to better understand real-life situations |
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Term
| the other things equal assumption |
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Definition
| condition by which all other relevant factors remain unchanged |
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Term
| production possibility frontier |
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Definition
| illustrates the trade-offs facing an economy that produces only two goods. it shows the maximum quantity of one good that can be produced for any given quantity produced by the other |
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Term
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Definition
| an individual has a comparative advantage in producing a good or service if the opportunity cost of producing the good is lower for that individual than it is for other people |
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Term
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Definition
| an individual has an absolute advantage in an activity if he or she can do it better than other people. Having an absolute advantage is not the same thing has having a comparative advantage |
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Term
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Definition
| form of trade in which people directly exchange goods or services that they have for goods and services that they want |
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Term
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Definition
| a model that represents the transactions in an economy by flows around a circle |
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Term
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Definition
| a person or group of people that share their income |
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Term
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Definition
| an organization that produces goods and services for sale |
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Term
| markets for goods and services |
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Definition
| where firms sell goods and services that they produce to households |
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Term
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Definition
| the resources needed to produce something (not used up in production; sewing machine, not cloth) |
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Term
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Definition
| the branch of economic analysis that describes the way the economy actually works |
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Term
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Definition
| makes prescriptions about the way the economy should work |
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Term
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Definition
| a simple prediction of the future |
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