1.1 nature of economics Flashcards
What does PPF stand for
Production Possibility Frontier
Why is PPF curved
Because opportunity cost isn’t constant
What does a PPF line show
all the possible combinations of output,
And the max productive potential of an economy
What does an outward shift in a PPF show
The economy has increased its capacity to produce- shows economic growth
What is scarcity
It is the basic economic problem: the gap between the limited (scarce) resources and limitless wants, meaning ppl have to decide how to allocate resources efficiently so as to satisfy basic needs and as many additional wants as possible: SHOWN ON A PPF
What is a positive economic statement
A factual statement that can be proven true or false
What is a normative economic statement
A value judgement, can’t be proven true or false, often an opinion, look for “should”
Opportunity cost formula
What u sacrifice/ what u gain
What is opportunity cost
The value of the next best alternative foregone
Capital goods
Goods used to produce other goods e.g. machinery
Specialisation and division of labour positives
⬆️worker productivity, so ⬆️ efficiency, so ⬇️ costs of prod, potentially ⬆️ quality as each worker focusing on what they do best, and more opportunities for e.o.s
Specialisation and division of labour negatives
Work could become repetitive so maybe ⬇️ worker motivation and so ⬇️ efficiency, maybe less variety is producing one gd through specialisation
Functions of money
Medium of exchange
Measure of value
Store of value
Method of deferred payment (e.g. debt)
