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19 Cards in this Set
- Front
- Back
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model
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simplified representation of real situations that's used to better understand real-life situations.
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Theory
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models that are grouped together
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Production Possibility Frontier (PPF) |
a diagram that shows combination of two goods that are possible for a society to produce at full employment. Use of all resources. |
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Trade Offs :The PPF
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cost to change mix of production. does it make sense to import the goods from somewhere else? Can't have it all. To use it in one place is to not use it in another. |
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Static Analysis
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1. Resources 2. Level of Technology (production technique) 3. Productivity |
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Opportunity Cost
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what must be given up in order to get a certain good. all resources used... time, money everything has a cost |
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Economic Growth (pushes the curve outward) |
(2 possibilities) 1. Increase in factors of production 2. Better Technology - technical means of producing goods and services. |
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Factors of Production (5)
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land, labor, physical capital, entrepreneurship |
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Land
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Cost - Rent includes natural resources- mineral deposits oil natural gas water land acreage |
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Labor
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Cost- Wages mental and physical abilities of the workforce |
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Physical Capital
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Cost- Interest manufactured items used to produce the goods sold |
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ENTREPRENEURSHIP
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Cost- Profit Business owner |
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Human Capital (modern resource)
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Cost- Economic Growth educational achievements and skills of the labor force (increase labor productivity) |
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Trade
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physical things such as goods, services, labor, and raw materials.
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Circular Flow Diagram
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representation of production and trade in an economy. TRADE- flows in one direction (clockwise) MONEY- flows in the opposite direction (counter clockwise) |
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Positive Economics
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Descriptive describes the way the economy works |
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Normative Economics
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Prescriptive makes prescriptions about how the economy SHOULD work. |
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Markets for goods and services
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Factor Market
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