Unit 2: Closer Look At The Economic Problem Scarcity Flashcards
give another reason why the curve is sometimes called the ppf?
Because they can not move beyond the points on the curve
True or false : point within the curve is attainable ?
True
Why are points within the curve inefficient?
Either the available resources are not being used to their full potential or some are left idle
What does a point inside the ppf show ?
The economy is operating at less than potential output
How do you expand production at a point inside the ppf?
By simply using the existing resources fully and efficiently.
On the ppf where are resources fully and efficiently utilised?
On the production possibility curve
True or false : in the curve production output is equal to potential output
True
Define potential efficiency?
more output of one good can be obtained by sacrificing output of other goods
How can points beyond the ppf be obtained ?
By increasing quantity of available resources and/ or production techniques improved
What happens to the ppf when points above it are obtained ?
It has an outward shift
What does an outward shift on the ppf illustrate?
Economic growth
What does an improved technique imply ?
That less resources are required to produce the same level of output
When can both production output increase?
When the amount of available resources increase and / or productivity of available resources increases
What does an inward shift on the ppf indicate ?
Decline in potential output. Amount of available resources or the productivity decrease
How is the potential output chosen ?
The final choice will depend on the preference of society
What are the 3 central economic questions?
- What to produce ?
- How to produce it ?
- For whom ?
What are the 3 central economic questions used for ?
Used to introduce a variety of concepts, distinctions , factors of productions and economic systems.
What’s the purpose of economic activity
To satisfy human wants
What satisfy our wants ?
Goods and services
Difference between goods and services?
Goods are tangible objects eg: food etc
Services are intangible things eg: medical services
What is the next step after deciding what to produce ?
How to produce it
What are factors of production ?
Resources that are used to produce goods and services
What are natural resources ?
Gifts of nature eg: sunshine , minerals , waters , animal life etc
True or false : natural resources are in fixed supply
True but it is possible to exploit more of the available resources
True or false : natural resources cannot be replaced
True
What results do we see as natural resources cannot be replaced
Minerals are referred to as non-renewable or exhaustible assets As is the case with all the factors of production, both quality and the quantity of natural resources are important.
What is labour ?
Exercise of human and physical efforts in production of goods and services
What does the quantity available (labour ) depend on ?
It depends on the size and proportion of the population which are willing and able to work
What is human capital ?
Refers to the skills , knowledge and health of the workers
What is capital ?
Comprises of all manufactured resources (machinery, tools and buildings) which are used in the production of other goods and services
Why are capital good not produced for their own sake ?
They are produced to produce other goods
What is an entrepreneur?
Factors of production have to be combined and organized by people who see opportunities and are willing to take risks by producing goods in the expectation that they will be sold Entrepreneurs are the people who do this.
Why do entrepreneurs do this ?
For a profit
Name the fifth factor of production?
Technology
What is meant by “ technology has been improved “ ?
New knowledge has been put into practice and more goods and services are produced with the given level of natural resources, labour , capital and entrepreneurship
Invention vs innovation ?
Invention is the discovery of new technology .
Innovation is incorporating the new knowledge into actual production
Why is money not a factor of production?
Money can not produce good and services
What are goods and services produced by ?
Factors of production
What is money ?
Medium of exchange
What choice do we have to make when deciding how to produce goods and services ?
Choice of what is the best method of production will be
True or false : production of often involves one technique
False
What 4 factors are considered when choosing production techniques?
The availability of resources
The quality of resources available
The relative prices of the resource available
The labour laws of the country and other relevant laws
Who are good and services produced for ?
Government and the rest of the economy
Private vs public sector
Private : rest of the economy
Public : government
The private sector is the part of the economy not run by the government. It comprises the businesses and enterprises that are controlled by private individuals and groups for the purpose of making a profit. Companies and organizations run by the state are considered to be the public sector.
