1.3 Opportunity Cost Flashcards
Opportunity Cost
Cost of the next best alternative forgone when a decision is made.
Trade-off
A sacrifice that is made in order to gain something
Production possibility curve
A way of showing the opportunity cost between two goods for a whole economy, firm or consumer.
Inefficient productivity
This is found at any point within the PPC
Productively efficient
Any point on the PPC. This is the when all resources are being used to maximum possible output.
Why is the PPC curved?
because not all inputs are equal in their productive effect. Some inputs are more aligned to producing some goods than others.
A point outside the PPC is unattainable unless….
there is a change in the quantities of the factor of production
The PPC will shift outwards if….
there is an increase in the quantity of raw materials or labour available or capital available.
Immigration will lead to…..
An outward shift in the PPC
A discovery of a new technology will….
Lead to an outward shift of the PPC
A high unemployment rate will ….
be a point withint the PPC
An outbreak of a deadly disease will…..
lead the PCC to shift inwards.
Specialisation
Focusing on one activity to be able to produce more efficiently
Division of labour
Splitting up a task into smaller activities to be able to produce more efficiently
Advantages of specialisation
More goods and services produced per unit of labour, lower average production cost.
