January 4, 2017

Factors of Production 

1. Land
2. Labor 
3. Capital (Human capital & Physical capital)
4. Entrepreneurship 

What is Land?

• It is natural resources.

What is Labor?

• It is work being exerted.

What is Human Capital?

• It is when people acquire skills & knowledge through experience & education.

What is Physical Capital?

• It is money, tools, buildings, equipment, & machinery.

What is Entrepreneurship?

• In order to become an entrepreneur one must:
• Take risks.
• Innovate.

What are Tradeoffs?

• It is an alternative that we sacrifice when we make a decision. 
• Scarcity leads to tradeoff 
• Ex: A farmer who plants tomato in one spot can't produce corn in same spot. 

What is Opportunity?

• It is the most desirable alternative giving up as the result of a decision.
• It is a type of trade off.

What is Guns or Butter?

• It is a phrase referring to trade offs that the government makes when choosing whether to produce more or less military or consumer goods. 

What is thinking at the margins?

• It is deciding whether to add or subtract one additional unit of some resources.

What is a Production Possibilities Graph?

• It is a graph that shows alternative ways to use economy recourses.
• Straight/Curved

What are the 4 key assumptions?

1. Only two goods can be produced.
2. Full employment of resources. 
3. Fixed resources (Factors of Production)
4. Fixed technology 

What is Efficiency?

• It is the using of resources in such way to maximize production for goods and services.
• Increase profit.

What is Underutilization?

• It is the opposite of efficiency using fewer resources than an economy is capable of using.
• Decrease profit.