Microeconomics Private and Public Choice 14e Chapter 2 Vocab

Invention

creation of new product or process, often facilitated by knowledge of engineering and science

Production Possibilities Curve

curve that outlines all possible combinations of total output that could be produced

Capitalism

economic system which productive resources are owned privately and goods and resources are allocated through market prices

Law of Comparative Advantage

individuals, firms, regions, or nations can gain by specializing in the production of goods that they produce at a low opportunity cost (cheaply) and exchange them for goods they cannot produce cheaply (at high opportunity cost)

Market Organization

method of organization in which private parties make own plans and decisions with guidance of unregulated market prices. Basic economic questions of consumption, production, and distribution are answered through these decentralized decisions

Collective decision making

method of organization relying on public sector decision making (voting, political bargaining, lobbying) to resolve basic economic questions

Division of Labor

method that breaks down production of a product into a series of specific takes, each performed by a different worker

Middlemen

people who buy and sell goods or services and arrange trades; reduces transaction costs

Entrepreneur

person who introduces new products or improved technologies and decides which projects to undertake; if successful will increase value of resources and expand sixe of economic pie

Private-Property Rights

property rights that are held exclusively by an owner and protected against invasion by others; can be transferred, sold, or mortgaged at owner's discretion

Investment

purchase, construction, or development of resources

Creative Destruction

replacement of old products and production methods by innovative new ones that consumers judge to be superior; process generates economic growth and higher living standards

Property Rights

rights to use, control, and obtain the benefits from a good or resource

Innovation

successful introduction and adoption of a new product or process; economic application of inventions and marketing techniques

Technology

technical knowledge available in an economy at any given time, level of tech determines output generated with limited resources

Transaction Costs

time, effort, and other resources needed to search out, negotiate, and complete an exchange