Factors of Production

Factors of Production (1/4)

• Land - natural resources
• Labor - work exerted
• Capital
• Human - ppl acquire skills & knowledge
• Physical - money, tools, buildings, equipment, machinery
• Entrepreneurship
• risk-taker, innovative

Trade-Offs

• Trade-off - alternative sacrificed when decision is made, scarcity = trade-offs
• Opportunity cost - type of trade-off, most desirable alt. given up as result of a decision
• Guns or Butter - refers to trade-off that the gov't makes when choosing whether to produce more or less military or consumer goods.
• Thinking at the Margins - deciding whether to +(increase) or -(decrease) 1 additional unit of some resource

The Production Possibilities Graph/Curve/Frontier (PPG,PPC,PPF) 

• graph that displays alt ways to use an economy's resources

Four Keys Assumptions abt PPG

1. Only 2 Goods can be Produced
2. Full Employment of Resources
3. Fixed Resources (factors of production)
4. Fixed Tech.

• Efficiency - using resources in such a way as to maximize production of goods & services, increases profits
• Underutilization - essential opposite of efficiency, using fewer resources that an economy is capable of using, decreases profits