central problem of economics

Question 1

opportunity cost

Answer 1

the cost of using resources to carry out a certain activity, measured in terms of the net benefit derived from the next best alternative forgone.

Question 2

production possibility curve

Answer 2

shows the maximum combination of two goods that the country can produce in a fixed period time, usually over a year, with a fixed level of technology and when all available resources are fully utilised and efficiently employed.

Question 3

productive efficiency

Answer 3

the situation in which the economy can produce more of one good without sacrificing the production of another good

Question 4

capital goods

Answer 4

man made goods that are meant for the production of other goods. they are not meant for immediate consumption

Question 5

consumer goods

Answer 5

goods that are meant for final consumption, ready to use as they are.

Question 6

capital depreciation

Answer 6

the reduction in the value of capital goods, usually over a one year period due to wear and tear, or due to capital becoming obsolete

Question 7

allocative efficiency

Answer 7

situation in which the economy produces the combination of goods and services most desired by society, and in which society welfare is maximised