Chapter 3
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13 terms
Terms | Definitions |
|---|---|
 producer | Someone who changes natural resources, labor, and capital resources into goods and services |
| consumer | Someone who buys and uses goods and services |
| circular flow model | A model that shows how a market economy organizes the production and consumption of goods and services |
| factor market | A market in which the factors of production are bought and sold |
| product market | A market in which individuals use the money they received by selling goods and services in the factor markets to make their purchases |
| production possibilities curve | A model that shows the maximum amount of goods or services that can be produced from a fixed amount of resources in a specific time period |
| infrastructure | The public goods that are needed to support a population like roads, sewers, buildings, and power plants |
| productivity | The amount of goods and services that a worker can produce in a specific amount of time |
| specialization | The concentration on the production of a few goods and services |
| absolute advantage | The ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources |
| comparative advantage | The ability to produce a good at a lower opportunity cost than another producer |
| 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 |
| interdependence | A relationship between countries or other entities in which they rely on one another for resources, goods, or services |
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