Chapter 4 Flashcards
What’s the Scarcity problem?
Resources are scarce so, if you choose to produce one type of good (e.g manufactured) then you will produce less of another type (non- manufactured)
What’s opportunity cost?
What is given up as a result of a choice.
What is PPF?
Production Possibility Frontier
What is the role of the PPF?
It shows the maximum amount of goods that can be produced.
What is Economic growth?
It allows the the possibility to push past the PPF increasing maximum quantity goods that can be produced at the same price
What is decline?
Reduction of maximum quantity of goods produced.
What’s growth caused by?
Increase to:
Quantity
Quality
Of goods produced.
Q² CELL
Quantity and quality of capital, enterprise, land and labour.
What is decline caused by?
Destruction of economy due to war.
Unpredictable environment (climate change)
Unemployment (inactive factories)
What is consumption?
A decision to use resources in which benefits the economy in the short term.
What is an investment?
A decision to use resources to benefit the economy in the future.
What is productive efficiency?
When production is at its lowest cost and maximum output.
What is allocative efficiency?
Prioritises welfare over production maximum amount of goods.
What are capital goods?
Capital goods are investment (e.g factories and machines) and will lead to a greater economic growth in the future.
What are consumer goods?
Goods that will be used immediately (e.g food, water) , benefiting the economy immediately.
