Definition: the value of the best alternative forgone when an item or activity is chosen.
Definition: a cost that has already been incurred, cannot be recovered, and thus is irrelevant for present and future economic decisions.
Definition: The individual, firm, region, or country with the lowest opportunity cost of producing a particular good should specialize in that good.
Law of Comparative Advantage
Definition: The ability to make something using fewer resources than other producers face.
Definition: The ability to make something at a lower opportunity cost than other producers face.
Definition: The direct exchange of one good for another without using money.
Definition: Breaking down the production of a good into separate tasks.
Division of Labor
Definition: Focusing work effort on a particular product or a single task.
Specialization of Labor
Definition: A curve showing alternative combinations of goods that can be produced when available resources are used efficiently; a boundary line between inefficient and unattainable combinations.
Production Possibilities Frontier (PPF)
Definition: The condition that exists when there is no way resources can be reallocated to increase the production of one good without decreasing the production of another; getting the most from available resources.
Definition: To produce more of one good.a successively larger amount of the other good must be sacrificed.
Law of Increasing Opportunity Cost
Definition: An increase in the economy's ability to produce goods and services; reflected by an outward shift of the economy's production possibilities frontier.
Definition: The formal and informal institutions that support the economy-laws, customs, manners, conventions, and other institutional underpinnings that encourage people to pursue productive activity.
Rules of the Game
Definition: The set of mechanisms and institutions that resolve the what, how and for whom questions.
Definition: An economic system characterized by the private ownership of resources and the use of prices to coordinate economic activity in unregulated markets.
Definition: An owner's right to use, rent, or sell resources or property.
Private Property Rights
Definition: An economic system characterized by the public ownership of resources and centralized planning.
Pure Command System
Definition: An economic system characterized by the private ownership of some resources and the public ownership of other resources; some markets are regulated by government.