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Eco- CH. 2
Opportunity Cost
Term | Definition |
---|---|
Opportunity Cost (definition) | -the value of what you must give up when a choice or decision is made -modeled on a production possibilities graph (PPC) |
Opportunity Cost a.k.a... | the value of the next best alternative use of time, money, or resources |
Trade off | when you give something up in order to get something else |
Production Possibilities Curve | -illustrates the trade-offs facing an economy that hypothetically only produces 2 goods with their resources -it shows the max quantity of 1 good that can be produced for each possible quantity of the other good produced |
Efficient | -when an economy uses or employs all its resources -efficient is being on your PPC curve |
Efficient (IMP--MC on TEST) | -you can't make more of one product without producing less of the other product |
Economic Growth | -this means an increase in the production of goods and services |
Economies measure their growth using... | GDP |
Economic growth is caused by... | 1) better technology 2) more resources 3) investing in HUMAN CAPTIAL |
marginal benefit | additional benefit resulting from a small increase in some activity |
marginal cost | additional cost resulting from a small increase in some activity |
marginal principle | increase the level of an activity as long as its marginal benefit exceeds its marginal cost *choose the level at which the marginal benefit=marginal cost* |
principle of voluntary exchange | a voluntary exchange between 2 people makes both people better off |
nominal value | the face value of an amount of money |
real value | the value of an amount of money in terms of what it can buy |
principle of diminishing returns | suppose output is produced with 2+ inputs (resources), and we increase 1 input while holding the other input or inputs fixed. Beyond some point---called the point of diminishing returns---outputs will INCREASE at a DECREASING rate |