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Chapter 3 vocabulary from Contemporary's Economics by Matthew T. Downey

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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