Factor of Production

1. Land 
•  Natural Resources
2. Labor 
•  Work exerted 
3. Capital 
• Two Types
• Human Capital => when people acquire skills and knowledge through experience and education
• Physical Capital => can be anything like
• Money
• Tools 
• Buildings 
• Equipments 
• Machinery 
4. Entrepreneurship 
• Risk Taker 
• Innovation 

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Key Vocabulary

• Trade Off 
• An alternative that sacrifice when we make a decision 
• Scarcity reads to trade off 
• Opportunity Cost
• The most desirable alternative given up as a result of a decision 
• A type of trade off 
• Guns or Butter 
•  Trade off that the government makes when choosing between wether to produce more or less military or consumer goods
• Thinking at the Margins 
• Deciding wether to add or subtract one additional units of some resource 
• Production Possibilities 
• Graph (PPG)
• Curve (PPC)
• Frontier (PPF)
• Graphs that shows alternative ways to use an economics resources 
• Efficiency 
• Using resources in such a way to maximize the production of goods and services
• Increases profit 
• Underutilization 
• Opposite of efficiency 
• Using fewer resources then an economy is capable of using 
• Leads to decrease in profits

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Four Key Assumptions About PPG

1. Only two goods can be produced 
2. Full Employment of resources 
3. Fixed Resources 
4. Fixed Technology