Chapter 2 - Models and Gains from Trade

A statement that can be tested and validated; it describes "what is"

An opinion that cannot be tested or validated; it describes "what ought to be"

"Other things being equal" Everything should be constant besides the changing independent variable

The variables that can be controlled for in a model

All variables that cannot be controlled for in a model

A model that illustrates the combinations of outputs that a society can produce if all its resources are being used efficiently

States that the opportunity cost of producing a good rises as a society produces more of it

The limiting of one's work to a particular area

Refers to the ability of one producer to make more than another producer with the same quantity of resources

Produced for present consumption

Help produce other valuable goods and services in the future

The process of using resources to create or buy new capital