1.1 - PPF etc Flashcards
What is difference between Positive/objective statement and a Normative/subjective statement?
A Positive statement is one that is a fact, and can be verified and tested.
A normative or subjective statement is one that contains opinion.
What is the basic economic problem
We have finite resources, but infinite wants.
Not enough resources for all the demand, so resources have to be adequately assigned.
What is PPF Stand for?
Production Possibility Frontier
How does a graph of PPF work.
There is Capital goods on the x axis, Consumer goods on the y axis.
A curver is drawn, Which is the maximum productive potential of the economy
Where is the unobtainable point on PPF
Outside the curve, above it.
Where is inefficient point in PPF
Under the curve
Why is there inefficient point in PPF?
Unemployed resources or inefficient use of resources, not working at max capacity.
What is the opportunity cost?
The cost associated with choosing one thing over another.
Opportunity cost how to work out, in PPF, When movement along the curve.
Use ratios
Why is there movement along curve of PPF
Because they decide to produce at another point. maybe one is more profitable
Why outward shift in ppf
increase in labour, or better technology.
what is marginal analysis
analysis between 2 points, eg. A to B
What is specialisation and who made it.
Adam smith.
Specialisation is when one country specialises in what they are best at producing.
Advantages of specialisation
because it might be cheaper as they are more efficient at producing it as they are better at doing it. Inflation lower, so consumers get lower price level.
Disadvantages of specialisation
The country is dependant on other countries for other goods.
If something happens to that sector then whole economy falls.
