Term
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Definition
| Things that are produced and then used in the production of other goods and services |
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Term
| Factors of Production (or factors) |
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Definition
| The inputs into the process of production. Another term for resources. |
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Term
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Definition
| The process that transforms scarce resources into useful goods and services. |
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Term
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Definition
| Anything provided by nature or previous generations that can be used directly or indirectly to satisfy human wants. |
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Term
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Definition
| Goods and services of value to households |
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Term
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Definition
| The best alternative that we give up, or forgo, when we make a choice or decision. |
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Term
| Theory of Comparative Advantage |
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Definition
| Ricardo's theory that specialization and free trade will benefit all trading parties, even those that may be "absolutely" more efficient producers. |
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Term
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Definition
| A producer has an absolute advantage over another in the production of a good or service if he or she can produce that product using fewer resources. |
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Term
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Definition
| A producer has a comparative advantage over another in the production of a good or service if he or she can produce that product at a lower opportunity cost. |
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Term
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Definition
| Goods produced for present consumption. |
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Term
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Definition
| The process of using resources to produce new capital. |
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Term
| Production Possibility Frontier (ppf) |
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Definition
| A graph that shows all the combinations of goods and services that can be produced if all of society's resources are used efficiently. |
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Term
| Marginal Rate of Transformation |
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Definition
| The slope of the production possibility frontier (ppf). |
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Term
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Definition
| An increase in the total output of an economy. It occurs when a society acquires new resources or when it learns to produce more using existing resources. |
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Term
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Definition
| An economy in which a central government either directly or indirectly sets output targets, income, and prices. |
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Term
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Definition
| Literally from the French: "allow [them] to do." An economy in which individual people and firms pursue their own self-interest without any central direction or regulation. |
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Term
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Definition
| The institution through which buyers and sellers interact and engage in exchange. |
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Term
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Definition
| The idea that consumers ultimately dictate what will be produced (or not produced) by choosing what to purchase (and what not to purchase). |
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Term
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Definition
| The freedom of individuals to start and operate private businesses in search of profits. |
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