Production possibility frontiers Flashcards
What are capital goods?
-goods that are used to then create more goods
(E.g. machinery)
What are consumer goods?
-the finished products that people buy
(E.g. clothing)
What does a PPF line show?
-the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully used
What are the four factors of production?
-capital
-enterprise
-labour
-land
What can have an effect on land?
Bad weather
What can have an effect on labour?
Immigrants move away
What can have an effect on capital?
Viruses -> all machinery broke
What can have an effect on enterprise?
No new ideas
What is division of labour?
-specialisation of labour into separate tasks
Why is division of labour good?
-ensures higher productivity per worker
What is specialisation?
When a worker gets really good at one job and only perform within that sector
Why is specialisation good?
Makes people more:
-skilled
-quicker
-reliable
-productive
Which leads to:
-more sales
Why is specialisation bad?
Can make people:
-bored
-demand higher wages
-> also means no-one can do it if they’re not there
What is country specialisation?
-when a country specialises its resources into producing a limited range of goods and services
What is absolute advantage in country specialisation?
Being able to produce more of something than other countries
(Assuming they both have the same amount of FOP’s available)
What is comparative advantage in country specialisation?
Being able to produce something at a much lower opportunity
What are the pros of country specialisation?
-makes full use of resources
-increases output
-improves quality
-allows for exports
What are the cons of country specialisation?
-world recession
-risk of over-specialising
-overuse of natural resources
What is marginal utility?
The additional satisfaction a consumer gains from consuming one more unit of a good or service
What is marginal utility used for?
Economists use it to determine how much of an item a consumer will actually buy
What is consumer surplus?
The difference between the total amount that consumers are willing to pay and the total amount that they actually paid
What is producer surplus?
The difference between the amount the producer is willing to supply and the actual amount they receive
Define “diminishing marginal utility”
As the consumer consumes more of a product, their satisfaction decreases
What are some potential issues with specialisation?
-what is there’s a recession?
-low cost competition
-what is everyone then works in the one industry?
