AP Macro Unit 1 Vocab #2

Product Market

• Method for determining comparative advantage that measures what goes into production by using the formula IOU (Other goes Under)

• The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses

• The “place” where goods and services produced by businesses are sold to households

• Payment for the factors of production, namely rent, wages, interest, and profit

• Method for determining comparative advantage that measures what is produced by using the formula OOO (Other goes Over)

Factor/Resource Market

• Method for determining comparative advantage that measures what goes into production by using the formula IOU (Other goes Under)

• The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses

• The “place” where goods and services produced by businesses are sold to households

• Payment for the factors of production, namely rent, wages, interest, and profit

• Method for determining comparative advantage that measures what is produced by using the formula OOO (Other goes Over)

Factor Payments

• Method for determining comparative advantage that measures what goes into production by using the formula IOU (Other goes Under)

• The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses

• The “place” where goods and services produced by businesses are sold to households

• Payment for the factors of production, namely rent, wages, interest, and profit

• Method for determining comparative advantage that measures what is produced by using the formula OOO (Other goes Over)

Input Method

• Method for determining comparative advantage that measures what goes into production by using the formula IOU (Other goes Under)

• The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses

• The “place” where goods and services produced by businesses are sold to households

• Payment for the factors of production, namely rent, wages, interest, and profit

• Method for determining comparative advantage that measures what is produced by using the formula OOO (Other goes Over)

Output Method

• Method for determining comparative advantage that measures what goes into production by using the formula IOU (Other goes Under)

• The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses

• The “place” where goods and services produced by businesses are sold to households

• Payment for the factors of production, namely rent, wages, interest, and profit

• Method for determining comparative advantage that measures what is produced by using the formula OOO (Other goes Over)

Productive Efficiency

• The producer with the lowest opportunity cost

• When the government redistributes income

• Any point on the PPC representing products that are being produced in the least costly way

• The producer that can produce the most output OR requires the least amount of inputs (resources)

• The most optimal point on the PPC representing products that are being produced are the ones most desired by society

Allocative Efficiency

• The producer with the lowest opportunity cost

• When the government redistributes income

• Any point on the PPC representing products that are being produced in the least costly way

• The producer that can produce the most output OR requires the least amount of inputs (resources)

• The most optimal point on the PPC representing products that are being produced are the ones most desired by society

Absolute Advantage

• The producer with the lowest opportunity cost

• When the government redistributes income

• Any point on the PPC representing products that are being produced in the least costly way

• The producer that can produce the most output OR requires the least amount of inputs (resources)

• The most optimal point on the PPC representing products that are being produced are the ones most desired by society

Comparative Advantage

• The producer with the lowest opportunity cost

• When the government redistributes income

• Any point on the PPC representing products that are being produced in the least costly way

• The producer that can produce the most output OR requires the least amount of inputs (resources)

• The most optimal point on the PPC representing products that are being produced are the ones most desired by society

Transfer Payments

• The producer with the lowest opportunity cost

• When the government redistributes income

• Any point on the PPC representing products that are being produced in the least costly way

• The producer that can produce the most output OR requires the least amount of inputs (resources)

• The most optimal point on the PPC representing products that are being produced are the ones most desired by society