Competency 2.1 - analyze how scarcity and opportunity cost influence choices about how to allocate resources Flashcards
scarcity
choices have to be made when either purchasing or producing goods and services because of this
allocative efficiency / economic efficiency
a society achieves this if it produces the types and quantities of goods and services that most satisfy its people
production efficiency / technical efficiency
a society achieved this when it is producing the grestest quanity of goods and services posssible from its resourced at a mininum cost, thus using fewer resources and increasing production quantities
contributory standard (Standards of Equity)
people are entitled to a share of goods and services based on what they contribute to society; those making larger contributions will receive larger shares
needs standard (Standards of Equity)
a person’s contribution to society is irrelevant as goods and services are distributed based on the needs of different households
equality standards (Standards of Equity)
every person is entitled to an equal share of goods and services simply for existing
full employment
an economy that uses all of its available resources, not just labor
production possibilities frontier curve
a model of the economy used to illustrate the problems ssociated with scarcity, showing the maximum feasible combinations of two goods or services that society can produce, assuming all resources are used in their most productive manner
technical efficiency
all points on the PPF curve; achieved when more of one good cannot be produced without producing less of the other good
opportunity cost
the loss of potential gain from other options when one is chosen over the other
law of increasing costs
as more of a good or service is produced, it’s opportunity cost will rise
allocative efficiency
respresented on the PPF curve as the point that best satisfies society’s needs and wants; this point cannot be located without further information about society’s desires
economic growth
requires that society increase the amount of resources it has or make those resources more productive through the application of technology; represented by an outward shift of the PPF curve