Econ 105 Chapter 2
Terms
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- Scarcity
- The situation in which unlimited wants exceed the limited resources available to fulfill those wants.
- Production Possibilities Frontier
- A curve showing the maximum attainable combinations of two products that may be produced with available resources.
- Opportunity Cost
- The highest valued alternative that must be given up to engage in an activity.
- Economic Growth
- The ability of the economy to produce increasing quantities of goods and services.
- Trade
- The act of buying or selling.
- Absolute Advantage
- The ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources.
- Comparative Advantage
- The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than other producers.
- Market
- A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade.
- Product Markets
- Markets for goods—such as computers—and services—such as medical treatment.
- Factor Markets
- Markets for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability.
- Circular-Flow Diagram
- A model that illustrates how participants in markets are linked.
- Free Market
- A market with few government restrictions on how a good or service can be produced or sold, or on how a factor of production can be employed.
- Entrepreneur
- Someone who operates a business, bringing together the factors of production—labor, capital, and natural resources—to produce goods and services.