The Economic problem: Scarcity and choice Flashcards
Production ?
The process by which resources are transformed into useful forms.
Resources or input ?
Anything provided by nature or previous generations that can be used directly or indirectly to satisfy human wants.
Capital ?
Things that have already been produced used to produce other goods and services.
Producers ?
People or group of people, public or private, who transform resources into usable products.
Outputs ?
Usable products.
Ricardo’s Theory ?
Theory of comparative advantage: Specialization and free trade will benefit all trading parties, even those that may be more efficient producers.
Consumer goods ?
Goods produced for present consumption.
Investment ?
The process of using resources to produce new capital.
PPF = Production Possibility Frontier
It’s a graph that shows all the combinations of goods and services that can be produced if all of society’s resources are used efficiently
The Y-axis measure ?
The quantity of capital goods produced
The X-axis measure ?
The quantity of consumer goods
The point G ?
Represent combinations that cannot be reached
To be efficient, an economy must ?
Produce what people want !
The economy must be operating at the right point of the ppf.
How is called the slope of the ppf ?
The marginal rate of transformation= MRT
The PPF represents ?
Choices available within the constraints imposed by the current state of technology
Economic growth ?
An increase in the total output of an economy
Economic growth occurs when ?
When a society acquires new resources, or, produce more using existing resources
A command economy ?
An economy in which central government either directly or indirectly sets output target, incomes and prices.
A laissez-faire economy ?
An economy in which individual people and firms pursue their own self-interests without any central direction or regulation.
The behavior of buyers and sellers in a laissez-faire economy determines ?
What gets produced, how it is produced and who gets it.
The consumer sovereignty ?
The idea that consumers ultimately dictate what will be produced or not by choosing what to purchase.
In a free market system ?
The market is left to operate on its own, with no outside interference.
The basic coordinating mechanism is Price.
