Scarcity, choice, opportuniy cost and PPC Flashcards
Scarcity?
is a situation in which available resources, or factors of production, are finite, whereas wants are infinite. There not enough resources to produce everything human being need and want.
Name all the factors of production
- Land
- Labour
- Capital
- Entrepreneurship
Choice?
economics is a study of choices leading to the best possible use of scarce resources in order to best satisfy unlimited human needs and wants.
3 basic economic questions
- What to produce?
- How to produce?
- For whom to produce?
The first 2 econ basic questions depend on what?
resource allocation, assigning available factors of productions to specific uses among many possible alternatives.
The third econ basic questions depend on what?
the distribution of output for each individual. aka distribution of income
Opportunity cost?
the value of the best next alternative that must be sacrificed to obtain something else. Results from scarcity that choices must be made.
The production possibilities curve model (PPC)
the PPC model can be used to show the concepts of scarcity, choice and opportunity cost and a situation of unemployed resource and inefficiency.
Fully employed resource
all resource are being fully used
Efficiency of resource
productive efficiency, best possible way to avoid waste
The PPC
represents all combinations of the maximum amounts of two goods that can be produced by an economy, given its resource and technology, when there is full employment of resources and productive efficiency.
Production possibilities
All points on the PPC
Increasing opportunity cost
as production switches from A to B, it is necessary to give up increasing more A for each extra unit of B produced, because factors of production suited to A production will be less suited to B production.
Constant opportunity cost
equally well suited to the production of both goods (basketballs and volleyballs)
