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21 Cards in this Set

  • Front
  • Back

explicit cost

actual monetary $ for a product

implicit cost

amount of money gained if an alternative, optimal action is taken




amount of money spent by businesses to improve production

consumer goods

goods meant for direct consumption by the consumer

capital goods

goods meant for indirect consumption by individuals (for make other goods or to help a business)

Four Factors of Production

land, labor, capital, entrepeneurship


anything that comes from nature


any effort someone devotes to a task

human capital

any skills / experience that helps increase the value of a person

physical capital

any human-made resource used to create things

product market

place where consumers by goods from businesses

resource (factor) market

place where businesses by resources

Circular flow model

model in which businesses give goods to individuals for money and businesses receive resources from other businesses or from individuals.

PPC (Production Possibility Curve)

Measures ability to create two different goods on two axes. -Slope = Opportunity Cost

Constant Opportunity Cost PPC


Law of Increasing Opportunity Cost

As you produce more of a good A, the opportunity cost will increase (because you will be producing less and less of good B)

i.e. PPC is concave down

Productive Efficiency

Products are made at the cheapest possible cost

Measure of how close we are to the boundary of the PPC

Allocative Efficiency

The right proportion of products is being created based on society's desires

Measure of where we are on the boundary of the PPC

3 PPC Growth Reasons

Resources, Technology, Trade

Input vs Output PPC Problem

Input problems involve showing how much input is necessary per unit work. Output problems show how much output there is per unit work.