VOCABULARY
What is given up in order to have or use a scarce resource.
Opportunity Cost
Where an inefficient point would be located on a PPC.
Inside (under) the curve
The math to determine opportunity cost and comparative advantage for an input question.
"It" over
A curved (bowed out) PPC graph represents this.
Increasing opportunity costs
The point at which quantity demanded and quantity supplied are equal.
Market Equilibrium
Agreed-upon rate at which countries exchange goods and services
Terms of Trade
To the right
(stating "under" is not accepted)
The math to determine opportunity cost and comparative advantage for an output question.
"Other" Over
The horizontal axis on the supply and demand curve.
Quantity
A market in which the government directs the production of resources. AKA centralized planning.
Command (or Planned) Economy
The ability of a person or country to produce a product at a lower opportunity cost than another country
Comparative Advantage
When demand increases, the equilibrium price does this.
Increases (goes up)
The person (or country) that has the comparative advantage for producing an item, is the one who has this.
Lowest opportunity cost
The three questions all societies must answer.
WHAT to produce?
HOW to produce it?
FOR WHOM to produce? (or WHO should receive the goods / services?)
Knowledge and skills gained from education/training
Human Capital
Land, labor, capital, entrepreneurship
Factors of Production (Economic Resources)
This causes a change in quantity supplied.
Price
The person (or country) that can produce the most of an item in the same time frame as another person (or country) has this.
Absolute advantage
Consumers will buy more of a good when its price is lower and less when the price is higher. (Name this concept)
Law of Demand
This is the reason that the demand for bagels decreases when the prices of cream cheese rises.
They are complements or complement goods.
A situation where the quantity demanded for a good or service exceeds the quantity supplied
Shortage
An outward shift of the PPC represents this.
Economic growth.
The two ways to measure productivity and comparative advantage.
Inputs and outputs
A decrease in the cost of resources will cause this.
Increase in supply (or the supply curve to shift right)
This is what happens in the furniture market when workers in furniture factory go on strike.
Supply of furniture decreases (or shifts left) due to the decrease in productivity.
(Just saying productivity decreases won't be accepted without the impact on supply)