2.4: Key Terms
- Page ID
- 181293
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|---|---|---|---|---|---|
| (Eg. "Genetic, Hereditary, DNA ...") | (Eg. "Relating to genes or heredity") |  | The infamous double helix | https://bio.libretexts.org/ | CC-BY-SA; Delmar Larsen |
| Word(s) | Definition | Image | Caption | Link | Source |
|---|---|---|---|---|---|
| allocative efficiency | when the mix of goods produced represents the mix that society most desires | ||||
| budget constraint | all possible consumption combinations of goods that someone can afford, given the prices of goods, when all income is spent; the boundary of the opportunity set | ||||
| comparative advantage | when a country can produce a good at a lower cost in terms of other goods; or, when a country has a lower opportunity cost of production | ||||
| invisible hand | Adam Smith's concept that individuals' self-interested behavior can lead to positive social outcomes | ||||
| law of diminishing marginal utility | as we consume more of a good or service, the utility we get from additional units of the good or service tends to become smaller than what we received from earlier units | ||||
| law of diminishing returns | as we add additional increments of resources to producing a good or service, the marginal benefit from those additional increments will decline | ||||
| marginal analysis | examination of decisions on the margin, meaning a little more or a little less from the status quo | ||||
| normative statement | statement which describes how the world should be | ||||
| opportunity cost | measures cost by what we give up/forfeit in exchange; opportunity cost measures the value of the forgone alternative | ||||
| opportunity set | all possible combinations of consumption that someone can afford given the prices of goods and the individual’s income | ||||
| positive statement | statement which describes the world as it is | ||||
| production possibilities frontier (PPF) | a diagram that shows the productively efficient combinations of two products that an economy can produce given the resources it has available. | ||||
| productive efficiency | when it is impossible to produce more of one good (or service) without decreasing the quantity produced of another good (or service) | ||||
| sunk costs | costs that we make in the past that we cannot recover | ||||
| utility | satisfaction, usefulness, or value one obtains from consuming goods and services |