8 terms

Chapter 2: An Economic Model

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Allocative Efficiency
allocating our resources to produce the kinds of goods and services we want the most
Diminishing Marginal Returns
increasing one input, while holding all other inputs constant, will eventually result in smaller and smaller additions to output
Economic Efficiency
using all of our resources and in a technically and allocatively efficient manner
Economic Model
an abstract description of a part of an economy. Simplifying assumptions are made, with a goal of understanding and explaining economic events.
Opportunity Cost
the value of the best forgone alternative. It is what one gives up doing when making a choice.
Principle of Increasing Costs
As we increase the productions of a good while increasing a single input, the opportunity cost eventually increases
Production Possibilities Frontier
an economic model showing possible combinations of outputs, given resources and technology
Technical Efficiency
using methods to produce goods and services that minimize costs of producing or maximize output given our inputs.
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