| Term | Definition |
|---|---|
| capital | A factor of production consisting of tools, equipment, and infrastructure used to produce goods and services. |
| factors of production | The resources used to produce goods and services, including land, labor, capital, and entrepreneurship. |
| labor | A factor of production consisting of human effort and skills used to produce goods and services. |
| land | A factor of production that includes natural resources and physical space used in production. |
| non-rival | A characteristic of a good or resource where one person's use does not prevent another person from using it simultaneously. |
| resources | Inputs or materials used to produce goods and services, including factors of production such as land, labor, and capital. |
| scarcity | The fundamental economic problem that resources are limited while wants and needs are unlimited. |
| trade-offs | The choices made when selecting one option over another due to limited resources and competing wants. |
| Term | Definition |
|---|---|
| constant opportunity costs | A situation where the opportunity cost of producing one good remains the same regardless of the quantity produced, resulting in a linear PPC. |
| decreasing opportunity costs | A situation where the opportunity cost of producing one good decreases as more of that good is produced, resulting in a bowed-in PPC. |
| economic contraction | A decrease in an economy's capacity to produce goods and services, typically represented by an inward shift of the PPC. |
| economic growth | An increase in the production of goods and services in an economy over time, measured by the growth rate of real GDP per capita. |
| efficiency | The production of the maximum output from a given set of resources, represented by points on the PPC. |
| factors of production | The resources used to produce goods and services, including land, labor, capital, and entrepreneurship. |
| increasing opportunity costs | A situation where the opportunity cost of producing one good increases as more of that good is produced, resulting in a bowed-out PPC. |
| inefficiency | A situation where resources are not being used optimally, resulting in production below the maximum possible output. |
| opportunity cost | The value of the next best alternative that must be given up when making a choice. |
| Production Possibilities Curve | A graph showing the maximum combinations of two goods that can be produced with available resources and technology. |
| productivity | The amount of output produced per unit of input, such as output per worker or output per hour of labor. |
| scarcity | The fundamental economic problem that resources are limited while wants and needs are unlimited. |
| technology | Tools, techniques, and knowledge used in production that improve efficiency and output. |
| trade-offs | The choices made when selecting one option over another due to limited resources and competing wants. |
| underutilized resources | Resources that are not being used to their full productive capacity, represented by points inside the PPC. |
| Term | Definition |
|---|---|
| absolute advantage | A situation in which an individual, business, or country can produce more of a good or service than any other producer with the same quantity of resources. |
| comparative advantage | The ability of a producer to create a good or service at a lower opportunity cost than another producer. |
| consumption opportunities | The range of goods and services that can be consumed, which may extend beyond what a producer can make alone through specialization and trade. |
| gains from trade | The economic benefits that result when producers specialize according to comparative advantage and engage in mutually beneficial exchange. |
| mutually beneficial trade | Exchange between trading partners where both parties gain from the transaction. |
| opportunity cost | The value of the next best alternative that must be given up when making a choice. |
| Production Possibilities Curve | A graph showing the maximum combinations of two goods that can be produced with available resources and technology. |
| specialization | The concentration of production effort by individuals, regions, or countries on goods or services in which they have a comparative advantage. |
| terms of trade | The ratio at which one good or service is exchanged for another; the price at which trade occurs between trading partners. |
| Term | Definition |
|---|---|
| consumer income | The total earnings and resources available to consumers, which influences their ability and willingness to purchase goods and services. |
| demand curve | A graph showing the relationship between the price of a good and the quantity demanded, typically downward-sloping to reflect the law of demand. |
| determinants of demand | Factors that influence and cause changes in the quantity of a good or service that consumers are willing and able to buy at various price levels. |
| downward-sloping demand curve | A demand curve that slopes downward from left to right, illustrating the inverse relationship between price and quantity demanded. |
| good | A tangible product that can be produced, bought, and sold in a market. |
| inverse relationship | A relationship between two variables where one increases as the other decreases, and vice versa. |
| law of demand | An economic principle stating that there is an inverse relationship between the price of a good and the quantity demanded by consumers, all else being equal. |
| market demand curve | A graph showing the relationship between the price of a good and the total quantity demanded by all consumers in a market at each price level. |
| price | The amount of money required to purchase a good or service. |
| quantity demanded | The amount of a good or service that consumers are willing and able to purchase at a specific price. |
| service | An intangible product or activity provided by a producer to satisfy consumer wants. |
| shift in demand | A change in the entire demand curve caused by factors other than price, resulting in consumers demanding different quantities at each price level. |
| Term | Definition |
|---|---|
| determinants of supply | Factors that influence the quantity of goods and services producers are willing and able to supply at various price levels. |
| good | A tangible product that can be produced, bought, and sold in a market. |
| input prices | The costs of resources and factors of production used to produce goods and services. |
| law of supply | An economic principle stating that there is a positive relationship between the price of a good and the quantity suppliers are willing to produce and sell. |
| market supply curve | A graph showing the relationship between the price of a good and the total quantity supplied by all producers in the market at each price level. |
| positive relationship | A direct relationship between two variables where an increase in one corresponds to an increase in the other. |
| price | The amount of money required to purchase a good or service. |
| quantity supplied | The amount of a good or service that producers are willing and able to offer for sale at a given price. |
| service | An intangible product or activity provided by a producer to satisfy consumer wants. |
| shift | A change in the entire supply curve caused by factors other than price, resulting in a different quantity supplied at each price level. |
| supply curve | A graph showing the relationship between the price of a good and the quantity supplied, typically upward-sloping to reflect the law of supply. |
| Term | Definition |
|---|---|
| demand | The quantity of a good or service that consumers are willing and able to buy at various price levels. |
| determinants of demand | Factors that influence and cause changes in the quantity of a good or service that consumers are willing and able to buy at various price levels. |
| determinants of supply | Factors that influence the quantity of goods and services producers are willing and able to supply at various price levels. |
| disequilibrium | A market condition in which the quantity supplied does not equal the quantity demanded, causing imbalances that create surpluses or shortages. |
| equilibrium | A market condition in which the quantity supplied equals the quantity demanded at a particular price, with no tendency for change. |
| equilibrium price | The price at which the quantity demanded equals the quantity supplied, resulting in no tendency for change. |
| equilibrium quantity | The quantity bought and sold at market equilibrium, where quantity demanded equals quantity supplied. |
| market equilibrium | The price and quantity at which the quantity demanded equals the quantity supplied in a market. |
| market forces | The supply and demand pressures that drive prices toward equilibrium in response to surpluses and shortages. |
| quantity demanded | The amount of a good or service that consumers are willing and able to purchase at a specific price. |
| quantity supplied | The amount of a good or service that producers are willing and able to offer for sale at a given price. |
| shortage | A situation in which the quantity demanded of a good exceeds the quantity supplied at a given price, resulting in insufficient supply to meet consumer demand. |
| supply | The quantity of a good or service that producers are willing and able to offer for sale at various price levels. |
| surplus | A situation in which the quantity supplied of a good exceeds the quantity demanded at a given price, resulting in excess inventory in the market. |