Topic 2 Flashcards
what does it mean to think like an economist
use observation and theory
what is the PPF
production possibilities frontier, shows relationship between scarcity, choice, and opportunity cost
why does marginal opportunity cost increase
new technology and resources shifts the PPF outwards
What is economic growth in terms of the PPF scale
points move outwards past the line, does not need to grow in both directions (sectors)
positive analysis
relying on facts and logic (how it is)
normative analysis
value judgements (how it should be)
models are based on
assumptions and simplifications
circular flow diagram
circular flow diagram shows how income flows through the market between households and firms
product market
Product markets are markets for goods or services
factor market
Factor markets are markets for the factors of production,
labour,
capital, natural resources, and entrepreneurs
