January 4, 2017

Factors Of Production

1. Land: natural resources
2. Labor
3. Capital (human/ physical) human: when ppl acquire skills and knowledge through experience/education. Physical: money, tools, buildings, machinery etc
4. Entrepreneurship: involves risk taking, being inventive/innovative. Takes 3 factors of production to promote the business.

Trade-offs: alternative we sacrifice when we make a decision

Opportunity cost: next best alternative

Guns or butter:  trade-offs a country faces when choosing whether to produce more or less of military goods or consumer goods

Thinking at the margins: deciding whether to add/subtract one additional unit of some resource

Efficiency: using resources in such a way to maximize production of goods/services. Increases profits

Under-utilization: opposite of efficiency. Using fewer resources, leads to decreased profits.