ECON 1 Lecture Notes - Lecture 2: Opportunity Cost, Marginal Cost, International Trade

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Society"s economizing problem or factors of production or. Land- means much more than land includes natural resources used in the production process, e. g. oil. Labor- the physical actions and mental activities that people contribute to the production of goods and services. Capital- includes all manufactured aids used in producing consumer goods and services. Included are all factory, storage, transportation and distribution facilities, including tools and machinery. Unlike consumer goods that directly satisfy goods, capital or financial capital means for purchasing goods and services including capital goods. Entrepreneurial ability- entrepreneurs- these resources take the initiative in combining resources- establish the strategic business decisions- innovates- bears risk. Full employment the economy is employing all of its available resources. Two goods the quantity and quality of the factors of production are fixed. the state of technology the methods used to produce output is constant. The economy is producing only two goods, consumer goods and capital goods.

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