Production Possibilities


absolute advantage

the ability of one country, group, or individual to engage in a specific economic activity more efficiently than another

ceteris paribus

all other things held equal; all other factors or variables held constant

comparative advantage

the ability to produce a good or service at lower opportunity cost than another person or group

economic growth

the ability of the economy to produce more goods and services over time

final product

the result of the production process


a simplified version of a situation, which can be used to investigate real world events

opportunity cost

the value or benefit of the next best alternative given up when making a choice

production possibilities frontier

a model that shows the trade-off facing an economy that produces two goods

productive efficiency

situation in which the maximum possible production of one good is achieved without harming production of another good


anything that is used to produce something else


means, including tools, procedures, education, and knowledge, of transforming resources into a final product