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Econ 206 - WWU - Chapter 2


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An economic system based on private ownership of productive resources and allocation of goods according to the signals provided by market prices.
Collective decision making
The method of organization that relies on public-sector decision making (voting, political bargaining, lobbying, and so on) to resolve basic issues.
A profit-seeking decision maker who decides which projects to undertake and how they should be undertaken. A successful blank's actions will increase the value of resources and expand the size of the economic pie.
The creation of a new product or process, often facilitated by the knowledge of engineering and scientific relationships.
The successful introduction and adoption of a new product or process; the economic application of inventions and marketing techniques.
The purchase, construction, or development of capital resources, including both nonhuman capital and human capital (such as better education). Blank expands the availability of capital resources in an economy. The process of blank is sometimes referred to as capital format.
Law of comparative advantage
A principle that states that individuals, firms, regions, or nations can gain by specializing in the production of goods that they produce cheaply (that is, at a low opportunity cost) and exchanging those goods for other desired goods for which they are high-opportunity-cost producerst.
Private property rights
exclusively held by an owner, or group of owners, and that can be transferred to others at the owner's discretion.
Production possibilities curve
outlines all possible combinations of total output that could be produced, assuming (1) the utilization of a fixed amount of productive resources, (2) full and efficient use of those resources, and (3) a specific state of technical knowledge. It's slope indicates the rate at which one product can be traded off to produce more of the other.
Property rights
The right to use, control, and obtain the benefits from a good or service.
A system of economic organization in which (1) the ownership and control of the basic means of production rest with the state, and (2) resource allocation is determined by centralized planning rather than by market forces.
Transaction costs
The time, effort, and other resources needed to search out, negotiate, and consummate an exchange.
A person who buys and sells or who arranges trades. A blank reduces transaction costs.

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