U3 AOS 1 Choice, opportunity cost and efficiency in resource allocation

Question 1

economy

Answer 1

is a place where scarce resources are allocated among competing uses.

Question 2

Opportunity cost

Answer 2

Is the value of the next best alternative foregone when an economic choice is made

Question 3

Production Possibility Frontier (PPF)

Answer 3

highlights a number of ways that the economy could allocate its scarce resources.

Question 4

Allocative Efficiency

Answer 4

is the allocation of resources to the production of goods and services in a way which maximises the satisfaction of society’s wants and needs.

Question 5

Dynamic Efficiency

Answer 5

refers to how quickly an economy can reallocate resources to achieve allocative efficiency in response to changing consumer preferences.

Question 6

Productive/Technical Efficiency

Answer 6

is the maximisation of outputs per unit input i.e. minimising per unit production costs

Question 7

intertemporal Efficiency

Answer 7

refers to the balancing of the allocation of resources to satisfy the needs and wants of the current population and the future population.

Question 8

Resource allocation

Answer 8

relates to decisions about which types of goods and services will be produced and which wants will be satisfied. This may be decided by either the market system or by government economic planning.

Question 9

economic efficiency

Answer 9

exists when there is maximum output gained from a given volume of productive inputs, thereby affecting productive capacity and helping to maximise society’s general wellbeing and material living standards. It can mean allocative, dynamic, productive and intertemporal efficiency.