THE CENTRAL ECONOMIC PROBLEM

Question 1

Define Opportunity Cost

Answer 1

Opportunity cost is the net benefit of the next best alternative forgone when a
choice is made

Question 2

Define the PPC

Answer 2

The Production Possibility Curve (PPC) shows the maximum attainable
combinations of two goods that can be produced by an economy within a
specified period of time with all its resources fully and efficiently employed, at a given state of technology.

Question 3

What are Consumer goods

Answer 3

Consumer goods are products that have no future productive use and
are used directly by consumers

Question 4

What are Capital goods

Answer 4

Capital goods are goods that help increase the productive capacity of a
country, and they determine the capacity to produce for future
consumption

Question 5

Define Productive Capacity

Answer 5

Productive capacity is defined as the maximum possible output of an economy.

Question 6

Define PEG

Answer 6

Potential economic growth is the percentage annual increase in the economy’s
productive capacity or maximum possible output.

Question 7

Define AEG

Answer 7

Actual economic growth is the percentage annual increase in national output

Question 8

Define Standard of Living

Answer 8

Standard of Living refers to the well being of an average person in a country