LS 3 Flashcards
What is opportunity cost?
This is the value of the next best alternative
How do consumers use opportunity cost?
Consumers use it to decide what to spend their income on
How do producers use opportunity cost?
Producers use it to decide what and how to produce goods and services
How does the government use opportunity cost?
The government use it to decide what policies to choose
What does PPF stand for?
Production possibility frontier
What does a PPF curve show?
It shows the maximum potential output of a combination of two goods and services an economy can achieve when all its resources are fully and efficiently employed, given the current level of technology
What is economic growth?
Economic growth is an increase in the production of goods and services in an economy
What is negative economic growth?
Negative economic growth is a decrease in the production of goods and services in an economy
What are consumer goods?
Consumer goods are goods which do not produce other goods, they are used by people to satisfy their wants and needs
What are capital goods?
Capital goods are goods which are used to produce other goods and services.
What is shown if an economy sits on its PPF?
There is efficient allocation of resources, since none are being wasted or under-utilised
Why might an economy not be on its PPF?
- An inefficient use of resources
- Unemployed(not used) or under-utilised resources
