MICRO - LS3 - Production Possibility Frontiers Flashcards
Opportunity cost definition
The opportunity cost of a decision is the value of the next best alternative forgone
Uses of opportunity costs for consumers, producers, governments
Consumers - which goods to buy
Producers - what and how to make goods
Governments - what services to invest in
What’s a production possibility frontier
It shows the maximum potential output of a combination of 2 goods/services an economy can achieve when all it’s resources are fully and efficiently employed given the current level of technology
What does a point inside PPF show
Inefficient use of resources
What does point outside PPF show
Output that’s currently unobtainable
Economic growth definition
An increase in the production of goods/services in an economy
How is economic growth shown
Outward shift
What causes economic growth
Increase in quantity and quality of factors of production
Example of economic growth
South Korea from 1955
What’s negative economic growth
A decrease in the production of goods/services in an economy
How is negative economic growth shown on PPF
Inward shift
Causes of negative economic growth
Decrease in quantity and quality of factors of production
Examples of negative economic growth
Syria/Ukraine due to wars
Consumer goods definition
Goods that don’t produce other goods - used to satisfy wants and needs
Capital goods definition
Goods used to produce other goods
