economics methodology Flashcards
to master key knowlegde
what is the basic economic problem?
how do we allocate scarce resources to unlimited wants.
what are the factors of production? and explain them.
land- any natural resources and land that is able to produce them.
labour- workers
enterprise- entrepreneurs that are risk takers
capital- machinery and man maid aids to production
what are opportunity costs?
the cost of the next best alternative
what does a PPF curve show you?
the possible combinations of 2 products/services with given factors of production
the maximum possible production of 2 goods/services
can allocative efficiency be found on the PPF graph?
No because the PPF doesn’t account for demand of consumers of each Good.
how to change factors of production to increase productive capacity?
increase quality and quantity of factors of production such as buying machinery or increasing its efficiency.
