Econ Ch 2

the advantage conferred on an individual in an activity if they can do it better than other people.

people directly exchanging goods/services that they have for goods or services they want.

Represents the transactions in an economy by two kinds of flows around a circle: flows of physical things such as goods or labor in one direction and flows of money to pay for these physical things in the opposite direction.

the advantage conferred on an individual or nation in producing a good or service if the opportunity cost of producing the good or service is lower for that individual or nation than for other producers.

an organization that produces goods and services for sale.

Markets in which firms buy the resources they need to produce goods and services.

simple prediction of the future.

the resources used to produce goods and services. EX: labor & capital.

a person or group of people that share their income.

total income is divided among the owners of the various factors of production.

markets in which firms sell goods and services that they produce to households.

the branch of economic analysis that describes the way the economy actually works.

the branch of economic analysis that makes prescriptions about the way the economy should work.

a simplified representation of a real situation that is used to better understand real-life situations.

in the development of a model, the assumption that all relevant factors except the one under study remain unchanged.

illustrates the trade-offs facing an economy that produces only two goods. shows the max quantity of one good that can be produced for any given quantity produced of the other.

the technical means for producing goods and services.