Examining Economic Issues Flashcards
What is the opportunity cost?
The best alternative forgone; the product or opportunity an individual, business or government has given up to consume another product or have another opportunity.
What is a production possibility curve?
graphical representation of all possible combinations of two goods and services the economy can produce at any given time
What can a production possibility curve show?
- how opportunity costs arise when choices are made
- various combinations of two products that can be produced when resources are used to capacity
What does the PPF (production possibility frontier) show?
maximum amount that can be produced in an economy
_____ help economists eliminate unwanted influences to make a conclusion
assumptions
What are the 4 assumptions in the production possibility frontier (PPF)
- only two goods
- state of tech is constant
- quality remains unchanged
- all resources are fully employed
How do you calculate opportunity cost?
what you give up/what you get
If the economy is operating inside the PPF curve, what does that mean for efficiency?
not efficient, can be operating differently so productivity is maximised
If the economy is operating on the PPF, what does that mean?
It is maximising all resources, very efficient
Can the economy operate outside the PPF curve?
No, but the curve can move with further developments
What is the level of unemployment if the economy is operating on the PPF curve?
very low/no unemployment as resources are fully maximised
How do technological advancements affect the PPF?
- better quality of products
- more resources
