Economic Ch 2

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Economic Ch 2
2012-01-13 00:30:03
Economic 204

Economic class @ NU
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  1. transaction cost
    time, effort, and other resources needed to search out, negotiate, and complete an exchange
  2. middleman
    • person who buys and sells goods or services or arrange trade
    • reduces transaction cost
  3. private property right
    exclusively held by an owner and protected against invation by others
  4. production possibilities curve
    • outlines all possible combinations of total output
    • fixed amount of productive resources
    • a given amount of technical knowledge
  5. investment
    • purchase, construction, or development of resources, including physical assets
    • investment expands an economy's resources
  6. capital formation
    process of investment
  7. invention
    creation of a new product or process, often facilitated by the knowledge of engineering and science
  8. Innovation
    • successful introduction and adoption of a new product or process
    • economic application of inventions and marketing technique
  9. enterpreneur
    • a person who introduces new products or improved technologies
    • increase the value of resources and expand the size of the economic pie
  10. creative destruction
    replacement of old products and production methods by innovative new ones that consumers judge to be superior.
  11. division of labor
    breaks down the production of a product into a series of specific tasks
  12. law of comparative advantage
    states that individuals, firms, regions, or nations can gain by specializing in the production of goods
  13. market organization
    method of organization in which private parties make their own plans and decisions with the guidance of unregulated market prices
  14. capitalism
    an economic system in which productive resources are owned privately and goods and resources are allocated through market price
  15. collective decision making
    • relies on public sector decision making
    • voting, political bargaining, lobbying
    • resolve basic economic question
  16. socialism
    • ownership and control of the basic means of pruction rest with the state
    • resources allocation is determined by centralized planning