PPF Flashcards
Law of Comparative Advantage
The idea that when someone has a lower opportunity cost for an activity they have a “comparative advantage.”
Specialization? good or bad
Good: even for those who are better at everything, when people specialize everyone gains.
Biased technical change
when one side of the ppf shifts, because of technological advancements.
Extensive Growth
more input
Intensive Growth
Learning to use the same resources more efficiently.
Consumer Sovereignty
Free markets exist to fulfill consumer wants.
Opportunity Cost
The next best alternative to an action that must be sacrificed in order to do whatever you are doing.
Production Possibility Frontier… What is it?
The maximum amount of two things that can be produced efficiently.
Production Possibility Frontier… Assumptions
Inputs are held fixed; Only two goods; Tech is held fixed; all points on the curve are maximum efficiency.
Marginal Rate of Transformation
Measure of opportunity cost. measured as a slope- change in y / change in x
Law of Increasing Opportunity Costs
Costs more and more to get the same.
Price Discrimination
Different costumers paying different prices for the same thing. (airline seats, college tuition, dented appliances).
