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Economics
Ch 2 Economic Models
| Term | Definition |
|---|---|
| tabular model | a table or chart explaining the relationships between pairs of variables; also called a schedule |
| schedule | a table or chart explaining the relationships between pairs of variable; also called a tabular model |
| line graph | a graph formed by the plotting of data involving two variables and the connecting of the resulting points to form a line infinite information from the data |
| production possibilities curve (PPC) | a model that enables an economist to she the maximum feasible amount of two commodities that a business can produce when those two items are competing for that business |
| circular flow model | a model depicting the flow of economic goods and services between households, business firms, the government, and financial markets |
| consumption expenditures | the total expenditures made by all households |
| factors of production | the resources used in producing the nation's GDP; land, labor, financial capital, and entrepreneurship |
| land | the factor of production denoting all the natural resources that go into the production of goods |
| labor | the factor of production denoting all human effort that goes into the creation of goods and services |
| capital | the tools business firms use to produce goods and services |
| entrepreneurship | the factor of production denoting the activity of creatively combining natural resources, human labor, and financial capital in a unique way to develop new and useful products or services |
| factor costs | the payments business firms make in exchange for the four factors of production |
| rent | payment for the use of an owner's property |
| wages | factor costs involving all payments for labor used to produce goods or services |
| interest | an additional charge that a creditor demands from a borrower to cover the expense of the loan and to provide a profit; the factor cost involving the payments made on borrowed money |
| profits | factor costs involving the rewards entrepreneurs receive for successful risk taking |
| transfer payments | payments of money or goods from the government to individuals for which no specific economic repayment is expected |
| budget deficit | a situation in which a government, business firm, or individual receives LESS income than is paid out in expenses |
| budget surplus | a situation in which a government, business firm, or individual receives MORE income than is paid out in expenses |
| financial market | the vast collection of financial institutions that receive deposits of excess funds from household and that lend to business firms |
| dissaving | the action of withdrawing money from an account or borrowing money |
| crowding out | a situation in which governmental borrowing reduces the financial capital available to business firms |
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