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
