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26 Cards in this Set

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  • Back
economizing problem
- The choices necessitated because society’s economic wants for goods and services are unlimited but the resources available to satisfy these wants are limited (scarce).
economic resources
- The land, labor, capital, and entrepreneurial ability that are used in the production of goods and services; productive agents; factors of production.
land
- Natural resources (“free gifts of nature”) used to produce goods and services.
capital
- Human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods.
investment
- Spending for the production and accumulation of capital and additions to inventories.
labor
- People’s physical and mental talents and efforts that are used sto help produce goods and services.
entrepreneurial ability
- The human resource that combines the other resources to produce a product, makes nonroutine decisions, innovates, and bears risks.
factors of production
- Economic resources: land, capital, labor, and entrepreneurial ability.
full employment
- (1) The use of all available resources to produce want-satisfying foods and services; (2) the situation in which the unemployment rate is equal to the full-employment unemployment rate and there is frictional and structural but no cyclical unemployment (and the real GDP of the economy equals potential output).
full production
- Employment of available resources so that the maximum amount of (or total value of) goods and services is produced; occurs when both productive efficiency and allocative efficiency are realized.
productive efficiency
- The production of a good in the least costly way; occurs when production takes place at the output at which average total cost is a minimum and marginal product per dollar’s worth of input is the same for all inputs.
allocative efficiency
- The apportionment of resources among firms and industries to obtain the production of the products most wanted by society (consumers); the output of each product at which it marginal cost and price or marginal benefit are equal.
consumer goods
- Products and services that satisfy human wants directly.
capital goods
- Human-made resources (buildings, machinery, and equipment) used to produce goods and services; goods that do not directly satisfy human wants; also called capital goods.
production possibilities curve
- A curve showing the different combinations of two goods or services that can be produced in a full-production economy where the available supplies of resources and technology are fixed.
production possibilities table
- A table showing the different combinations of two goods or services that can be produced in a full-production economy where the available supplies of resources and technology are fixed.
opportunity cost
- The amount of other products that must be forgone or sacrificed to produce a unit of a product.
law of increasing opportunity costs
- The principle that as the production of a good increases, the opportunity cost of producing an additional unit rises.
economic growth
- (1) An outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology; (2) an increase of real output (grass domestic product) or real output per capita.
economic system
- A particular set of institutional arrangements and a coordinating mechanism for solving the economizing problem; a method of organizing an economy, of which the market system and the command system are the two general types.
market system
- All the product and resource markets of a market economy and the relationships among them; a method that allows the prices determined in those markets to allocate the economy’s scarce resources and to communicated and coordinated the decisions made by consumers, firms, and resource suppliers.
capitalism
- An economic system in which property resources are privately owned and markets and prices are used to direct and coordinate economic activities.
command system
- A method of organizing an economy in which property resources are publicly owned and government use central economic planning to direct and coordinate economic activities; command economy.
resource market
- A market in which households sell and firms buy resources or the services of resources.
product market
- A market in which products are sold by firms and bought by households.
circular flow model
- The flow of resources from households to firms and of products from firms to households. These flows are accompanied by reverse flows of money from firms to households and from households to firms.