Basic Concepts
The fundamental problem of unlimited wants and limited resources that exists in all societies.
What is SCARCITY?
natural resources used in production (water, trees, oil)
What is LAND?
A point on the production possiblities curve
What is PRODUCTIVITY/EFFICIENCY?
The most rare type of economy in existence today.
What is TRADITIONAL?
The freedom to buy and sell to whomever one chooses in a free market; both buyer and seller benefit
What is VOLUNTARY EXCHANGE?
human effort used to produce goods and services
What is LABOR?
A point below the production possibilities curve.
What is UNDERUTILIZATION/INNEFICIENCY?
The most common type of economy in the world today.
What is MIXED?
marginal benefits of an action equal or exceed the marginal costs of the action
What is a RATIONAL DECISION?
What, How, and For Whom to produce?
What are the three basic economic questions?
investment in education, training, or benefits that lead to a more skilled labor force
What is HUMAN CAPITAL?
A point above (right) the production possibilites curve.
What is CURRENTLY UNATTAINABLE?
The benefits are growth, productivity, and freedom but the tradeoffs are equity, security, and stability in this system.
What is MARKET?
Goods, services, and benefits provided by the government at free or greatly reduced cost to those in need.
What are REDISTRIBUTION PROGRAMS?
things purchased by consumers
What are consumer goods and services?
machines and tools used to produce goods and services
What is PHYSICAL CAPITAL?
The direction a production possibilities curve would shift if an entrepreneur invested in human or physical capital.
What is RIGHT/OUTWARD?
In this economy, all goods and services are publicly (government) owned and controlled.
What is COMMAND?
outputs divided by inputs gives the rate of this economic measure
What is PRODUCTIVITY?
Products which are purchased in order to produce other products.
What are CAPITAL GOODS?
productive resource that organizes the others, risk-taker, and innovator
What is ENTREPRENEURSHIP?
trade-off of producing two products shown on PPC is equal and perfectly substitutable
What is CONSTANT OPPORTUNITY COST?
In this type of economy there should be full employment.
What is COMMAND?
The metaphor created by Adam Smith which states that self-interest in-directly benefits the larger society and regulates a free enterprise economy
What is the INVISIBLE HAND?