| A | B |
|---|
| Economics | The study of how society uses its scarce resources |
| Opportunity Cost | The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action |
| Production Possiblity Frontier | A curve depicting all maximum output possibilities of two or more goods given a set of inputs (resources, labor, etc.). |
| Command Economy | When a government controls all aspects of economic activity |
| Market Economy | When people make decisions on all aspects of the communitu |
| Traditional Economy | When people produce enough to survive |
| Adam Smith | Came up with the ideas of capitalism |
| Karl Marx | Economist that started socialism/communism |
| Invisible Hand | Adam Smith's theory that goods, production, and price will be controlled by people's self-interest |
| Profit | Firm’s total revenue minus total cost |
| Scarcity | needs and wants exceed the resources available to meet them |
| Shortage | Temporary loss of a want |
| Specialization | Raises productivity because it allows a country to concentrate on a specific product then trade it with others |
| Absolute Advantage | General ability to produce more goods using fewer resources |
| Comparative Advantage | The ability to produce one good at a relatively lower opportunity cost then other goods |
| Davide Ricardo | Developed the Theory of Comparative Advantage |
| Theory of Comparative Advantage | Discusses the benefits of specialization and free trade |
| Natural Resources | Ex. Land |
| Human Resources | Ex. Labor |
| Capital Resources | Equipment used to make other things |
| Production | Process by which resources are transformed into useful forms |
