Chapter 2
What are the 2 roles of economists?
1. Scientist - explain the world
2. Policy advisors - improve the world
What are imports?
Goods produced abroad and sold domestically
What is a perfectly competitive market?
The good are all the same
What is a PPF (Production Possibilities Frontier)?
A graph that shows various combinations of outputs that the economy can possibly produce given the available factors of production and the available production technology.
What are exports?
Goods sold abroad and made domestically
What is a 'quantity demand'?
Amount of a good that buyers are willing and able to purchase
What does it mean if points are under the PPF?
There is inefficiency
What is absolute advantage?
The ability to produce a good using fewer inputs than another producer.
The quantity of demand of a good falls when the price of the good rises, other things being equal.
The quantity demanded of a good rises when the price of good falls
If all points are on PPF, what does this mean?
All resources are being utilized (efficient)
What is comparative advantage?
The ability to produce a good at lower opportunity cost than another producer.
What is the 'demand schedule'?
A table that shows the relationship between the price of a good and the quantity demanded.
Why the PPF is bowed outward (2 reasons)
Different workers have different skills.
There is some other resource, or mix of resources, with varying opportunity costs
True or False: Gains from trade arise from competitive advantage
True
What is the demand curve?
Shows how price affects quantity demanded, other things being equal