Eco Notes 2 Unit 1 1/8-1/9

Eco Notes 1/8/15

Capital goods- items used in the creation of other goods. ex. Such as factory machinery and trucks

Services- work that is performed for someone else

Factors of Production

1.       Land- natural resources

2.       Labor – work force

3.       Capital- Human capital and physical capital

        Human capital- knowledge and skills gained through education and experience                

        Physical- human made objects used to create other goods and services

4.       Entrepreneurship- innovative and risk taker

Topic: Tradeoff

Trade off- alternatives that we give up when we chose one course of action over another

Opportunity costs- most desirable alternative given up by making a decision

Production Possibility Graph – shows alternative ways to use resources

 

(Any point on the curve) Productive efficiency- Producing at the lowest cost and allocating resources efficiently and have full employment of resources

(Where to produce on the curve) Allocative efficiency- Where to produce on the curve