Download Chapter 2: Economic Tools and Systems | ECON - Econometrics 1 - Introduction and more Quizzes Introduction to Econometrics in PDF only on Docsity!
Opportunity Cost
the value of the best alternative forgone when an item or activity is chosen TERM 2
Sunk Cost
DEFINITION 2 In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered. TERM 3
Law of Comparative Advantage
DEFINITION 3 In economics, the law of comparative advantage is the idea that a nation is better off when it produces goods and services for which it has a comparative advantage. The individual with the lowest opportunity cost of producing a particular good should specialize in that good TERM 4
Absolute Advantage
DEFINITION 4 In economics, principle of absolute advantage refers to the ability of a party (an individual, or firm, or country) to produce more of a good or service than competitors, using the same amount of resources. TERM 5
Comparative Advantage
DEFINITION 5 In economics, the law of comparative advantage refers to the ability of a party (an individual, a firm, or a country) to produce a particular good or service at a lower opportunity cost than another party.
Barter
Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. TERM 7
Division of Labor
DEFINITION 7 Breaking down the production of a good into separate tasks TERM 8
Specialization of Labor
DEFINITION 8 focusing work effort on a particular product or a single task TERM 9
Production Possibilities Frontier (PPF)
DEFINITION 9 a curve showing alternative combinations of goods that can be produced when available resources are used efficiently; a boundary line between inefficient and unattainable combinations TERM 10
Efficiency
DEFINITION 10 A condition that exists when there is no way resources can be reallocated to increase the production of one good without decreasing the production of another, getting the most from available resources
Private Property
Rights
A property right is the exclusive authority to determine how a resource is used, whether that resource is owned by government or by individuals. TERM 17
Pure Command System
DEFINITION 17 an economic system characterized by the public ownership of resources and centralized planning TERM 18
Mixed System
DEFINITION 18 an economic system characterized by the private ownership of some resources and the public ownership of other resources, some markets are regulated by government
