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This exists when there is not enough of something freely available to satisfy everyone that wants it. An item is scarce if it has a cost associated with it.
Any activity that results in the conversion of resources that can be used in consumption.
All manufactured resources like machinery and equipment used in production. Capital in economics is NOT stocks and bonds.
The component of human resources that organizes, manages and assembles all other types of resources to create and operate business ventures.
Items that are scarce. Since they are scarce, they have a cost or price associated with them (incl. both goods and services).
Goods for which there is no scarcity. Since these goods are not scarce, there is no cost associated with them.
Giving up one good or activity to obtain some other good or activity. These are a result of scarcity.
The highest-valued alternative that must be foregone when a choice is made. This depends on what you value most.
Production Possibilities Schedule
Shows different combinations of goods and services that may be produced by the economy.
Production Possibilities Curve (PPC)
A graphical representation showing all possible combinations of quantities of goods and services that can be produced using the existing resources. It is the boundary between combinations that can be produced and those that cannot.
Society's pool of applied knowledge concerning how goods and services can be produced.
Marginal Opportunity Cost
The amount of one good or service that must be given up to obtain one additional unit of another good or service.
Law of Increasing Additional Cost
The opportunity cost of producing additional units of a good generally increases as society attempts to produce more of that good. This accounts for the bowed-out shape of the PPC.
The organization of economic activity so that what each person (or region) consumes is not identical to what it produces. Concentrates resources on the production of a good.
The ability to produce a good or service at a LOWER OPPORTUNITY COST than someone else.
Gains from Trade
The difference between what can be produced without specialization and trade vs. with specialization and trade.
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