Unit 1 Flashcards
Opportunity cost
is the value of the next highest alternative or foregone cost
Law of diminishing returns/diminishing marginal productivity
states that as we add successive units of one factor (labour) to fixed amounts of other factors, total product will rise but at a declining rate and marginal product will decline
Marginal product
the extra output from the addition of one extra worker
Marginal cost
the extra cost involved of producing one extra unit or the increase/decrease in total cost from increasing/decreasing the level of output by one unit
Marginal revenue
is the extra revenue gained from the production of one extra unit
Marginal benefit
the extra benefit gained from the production of one extra unit
Economics definition
the study of how individuals, firms, and governments make optimal choices from among a set of alternatives when facing scare resources
4 Scare Resources:
Land, labour, capital, enterprise
Implications of scarcity
Effects the rationale people have as well as limiting how we can utilise things
Three Basic Choices
1) what is to be produced
2) how is it to be produced
3) for whom is it produced
Different types of economic systems that make those choices
planned, pure, command, free
What is NOT a factor of production
a good or service
In a market economy the allocation of resources is determind by
the millions of independent decisions made by individual consumers and producers (pure market)
What 5 economic ideas are shown by PPC’s?
- limit to what you can achieve based on current resources
- opportunity costs
- scarcity
- efficacy
Production Possibility Curve
Shows you the limit to what you can make (the maximum productivity) In order to make the curve greater you need more resources (like land/labour/capital/enterprise)
