M 1/2 Flashcards
What does the production possiblity curve assume?
That resources are to be fully employed
Only two goods can be produced
What is a change in resource efficiency ?
PPC will pivot outwards.
What does the PPC show?
The maximum output possibl when all resources are employed.
What is a point lying outside the PPC?
Unattainable given the existing resources
What is a change in quantity of resources?
If resources increase, PPC would shift outwards and previously unattainable combinations of production now become attainable.
Where does economics growth take place?
At full employment of resources
What is human resource?
When people are not equally productive at all goods, some are better at one thing and other at other things. Making PPC bow outward
What is consumer demand?
Amount that an individual/s are willing to buy at any given price. (Have money to make purchases not just wish to)
What does a demand curve show us?
Shows the relationship between demand and price. (Price increases demand falls, price decreases demand increases) LAW OF DEMAND
What is a fall and increase in quantity demanded called?
Fall - contraction
Increase - extension
What are the exceptions to law of demand?
- snob goods
- investment goods
- quality goods
- giffen goods
What is a snob good?
When demand will not decrease much as price increases
What is an investment good?
Buyers hope their value will increase in the future, so will still demand even if price increases a little.
What is a quality good?
When people believe something is expensive because it has good quality and agree to pay the higher price
What is a giffen good?
Price falls - people move onto something better
What happens if demand changes?
The demand curve will shift
When will demand increase/shift outward ?
Consumers earn higher income Goods become more popular Price of substitute increases Price of compliment good decreases Quality improves Weather and seasonal changes take place
When will demand fall/shift inward?
Fall in price Increase in price Becomes less popular Bad publicity Lower/higher income tax rates
What is the income effect?
Income rises- people are better off , can afford more units of a good.
What is an inferior and normal good?
Normal - buy more of a good
Inferior - buy less of that good
What’s happens with price of a related good?
Price of a substitute rises - more of the first good is bought
Rises in joint demand - less of the first good will be bought
Describe fashion/taste
When a good is out of fashion or replaced, demand falls, shift left
Describe season
When. A good is out of season people won’t buy it
Define advertising
Good adverts get lifelike to buy and demand shifts right or left
Define peer pressure.
Influential polls can encourage/discourage people to buy less or more of a good , shift left/right
Define religion/customs/law
People compelled to buy/not buy a good by system.
What does the production possibility curve show ?
The opportunity cost
