Scarcity and Choice
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Created by:
RATURTLE Plus on February 7, 2011
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18 terms
Terms | Definitions |
|---|---|
 Production | The process by which resources are transformed into useful forms |
| Resources | Anything provided by nature or previous generations that can be used directly or indirectly to satisfy human wants |
| Capital | Things that have already been produced that are in turn used to produce other goods and services |
| Producers | Those people or groups of people, whether private or public, who use transform resources into usable products |
| Outputs | Usable products |
| Opportunity Cost | The best alternative that we give up, or forgo, when we make a choice or decision |
| Theory of Comparative Advantage | Ricardo's theory that specialization and free trade will benefit all trading parties, even those that may be absolutely more efficient producers |
| Consumer Goods | Goods produced for present consumption |
| Investment | The process of using resources to produce new capital |
| Production Possibility Frontier | A graph that shows all the combinations of goods and services that can be produced if all society's resources are used efficiently |
| Marginal Rate of Transformation | The slope of production possibility frontier |
| Economic Growth | An increase in the total output of an economy. It occurs when a society acquires new resources or when it learns produce more using existing resources |
| Economic Problem | Given scarce resources, how exactly do large, complex societies go about answering the three basic economic questions |
| Command Economy | An economy in which a central government either directly or indirectly sets output targets, incomes and prices. |
| Laissez-Faire Economy | An economy in which individual people and firms persue their own self interests without any central direction or regulation |
| Market | The institution through which buyers and sellers interact and engage in exchange |
| Consumer Sovereignty | The idea that consumers ultimately dictate what will be produced (or not produced) by choosing what to purchase (and what not to purchase) |
| Price | The amount that a product sells for per unit. It reflects on what a society is willing to pay |
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