What are the four factors of production?
land, labor, capital, entrepreneurship.
Land
refers not just to the ground but to all natural resources. Crude oil, water, air and minerals.
Labor
Skills and abilities to produce good services.
Capital
final goods and produced for use in further production.
Entrepreneurship
Person who sees the opportunity for new or better products and brings together resources needed for producing them.
Economics
The study of how best allocate scarce resources among competing uses.
Opportunity Cost
What is given up to get something else. the most desired goods or services are forgone to obtain something else.
Production Possibilites
Alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology
Scarce Resources
there's a limit to the amount of output w can produce in a given time period with available resources and technology
Efficiency
Maximum output of a good from the resources used in production
Inefficiency
A production possibilities curve shows potential output, not necessarily actual output. If we're inefficient, actual output will be less than that potential.
Economic Growth
An increase in output (real GDP); an expansion of production possibilities
What Are The Three Basic Decisions?
What, how, for whom
Market mechanism
the use of market prices and sales to signal desired outputs (or resource allocations).
Laissez faire
the doctrine of "leave it alone," of nonintervention by government in the market mechanism
Mixed economy
an economy that uses both market signals and government directives to allocate goods and resources
Market Failure
an imperfection in the market mechanism that prevents optimal outcomes (or that the invisible hand has failed to achieve the best possible outcomes. If the market fails, we end up with the wrong (suboptimal) mix of output, too much unemployment, polluted
Government Failure
Government intervention that fails to improve economic outcomes. It occurs when government intervention fails to improve market outcomes or actually makes them worse.
Macroeconomics
the study of aggregate economic behavior, of the economy as a whole. It's to understand and improve the performance of the economy as a whole.
Microeconomics
the study of individual behavior in the economy, of the components of the larger economy. It's concerned with the details of the big picture.
Ceteris Paribus
the assumption of nothing else changing.
Scarcity
Society's desire exceed the want - satisfying of the resources available to satisfy those desires.
What does the production possibilities curve illustrates what?
The limitations that exist because of scarce resources.