Factors of Of Production

Land- Natural Resources

Labor- Work exerted

Human capital- People acquire skill and knowledge through experience and education,

Physical capital- Money, tools, equipment and machinery.

Entrepreneurship- Risk taker, innovative mind

Trade-off- An alternative we sacrifice, when we make a decision.

Opportunity Cost- Most desirable alternative given up as a result of a decision. (next best alternative)

Guns or butter- Phrase, refers to trade off that nations face, when choosing whether to produce more or less military or consumer goods.

Thinking at the margins- Deciding whether to add or subtract one additional unit o some resource.

Production Possibilities Graph (PPG)
                                       Curve (PPC)
                                       Frontier (PPF)

Full Employment- not 100% productive, not 100% employed
Full Employment- 4-5% unemployment, 80-90% factory capacity