Slide 1.3 Flashcards
PPC (production possibility curve)
The production possibilities curve (or frontier)
represents all combinations of the maximum
amounts of two goods that can be produced by
an economy, given its resources and
technology, when there is full employment of
resources and efficiency in production. All points
on the curve are known as production
possibilities
Reasons for Scarcity and PPC
- Economy cannot produce outside its
PPC - Economy must make choice about
the combination of goods to be
produced - Choices involve opportunity costs
The law of Increasing opportunity Cost
The law of increasing opportunity cost is the concept that as you continue to increase
production of one good, the opportunity cost of producing that next unit increases. This
comes about as you reallocate resources to produce one good that was better suited
to produce the original good.
Actual economic growth is caused how?
Actual Growth: caused by reduction in unemployment and increase in
efficiency in productio
Growth in production possibilities in caused by….?
caused by increase in quantity of
resources, improvements in the quality of resources and technological
improvements
Factors of Production
Land (all natural resources), Labour and entrepreneurship, and capital
Increase in quantity of land is why
Land reclamation, increased access to supply of resources, and discovery of new resources
Why would the increase in quantity of labour and entrepreneurship?
Increase in birth rate, immigration, decrease in the natural rate of unemployment
Why would capital increase in quantity?
Investment
Improvement in quality for land?
Technological
advancements that allow for increased access to resources or the discovery of new resources
Fertilisers
Irrigation
Improvement in quality, labour and entrepreneurship
Education, training, re-training, and apprenticeship programes
Improvement in quality capital wise means?
Technological advancements that contribute to more efficient capital, and research and development
Draw the circular flow of income model
Yay now check teams :)
What is a leakage
Leakages are flows of money that leave the circular flow, reducing the overall size of the economy.
Injection
Injections are additions to the economy’s circular flow of income, increasing the total spending and economic activity
