barter
The direct exchange of one product for another without using money.
comparative advantage
The ability to make something at a lower opportunity cost than other producers face.
absolute advantage
The ability to make something using fewer resources than other producers use.
efficiency
The condition that exists when there is no way resources can be reallocated to increase the production of one good without decreasing the production of another; getting the most from available resources.
law of comparative advantage
The individual, firm, region, or country with the lowest opportunity cost of producing a particular good should specialize in that good.
economic growth
An increase in the economy's ability to produce goods and services; reflected by an outward shift of the economy production possibilities frontier.
division of labor
Breaking down the production of a good into separate tasks.
economic system
The set of mechanisms and institutions that resolve the what, how, and for whom questions.
opportunity cost
The value of the best alternative forgone when an item or activity is chosen.
mixed system
An economic system characterized by the private ownership of some resources and the public ownership of other resources; some markets are regulated by government.
private property rights
An owner's right to use, rent, or sell resources or property.
law of increasing opportunity cost
To produce more of one good, a successively larger amount of the other good must be sacrificed.
sunk cost
A cost that has already been incurred, cannot be recovered, and thus is irrelevant for present and future economic decisions.
specialization of labor
Focusing work effort on a particular product or a single task.
pure command system
An economic system characterized by the public ownership of resources and centralized planning.
pure capitalism
An economic system characterized by the private ownership of resources and the use of prices to coordinate economic activity in unregulated markets.
production possibilities frontier (PPF)
A curve showing alternative combinations of goods that can be produced when available resources are used efficiently; a boundary line between inefficient an attainable combinations.