1.3 Opportunity cost Flashcards
Introduction to Microeconomics
1
Q
What is opportunity cost?
A
The benefits forgone of the next best alternative when a choice is made (the cost of giving an opportunity up)
2
Q
What do households make choices about?
A
Their expenditure (what goods/services to buy)
3
Q
What do firms make choices about?
A
Which goods/services to produce
4
Q
What do governments make choices about?
A
Types of taxation, how much to tax, how to spend tax revenue and how to regulate markets
5
Q
What does a PPC show?
A
The difficult choices an economy has to make concerning consumer goods and investment in capital goods
6
Q
When would a PPC shift outwards?
A
When there’s economic growth and shows productive potential
7
Q
When would a PPC shift inwards?
A
When there’s negative economic growth and productive capacity has decreased
