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21 Cards in this Set
- Front
- Back
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Production Possibility Frontier |
Is the boundary b/w those combinations of goods and services that can be produced and those that cannot given the available resources |
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Ceteris Paribus |
To have everything remain the same and unchanged except for the variable we are analyzing |
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A point on a PPF is attainable when.. |
The point is ON the frontier or INSIDE the frontier |
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A point on a PPF is unattainable when... |
The point is OUTSIDE the PPF |
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Production Efficiency |
If we cannot produce more of one good without producing less of some other good. MB=MC |
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A point is efficient if... |
the point is ON the frontier |
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A point is inefficient if... |
the point is INSIDE the frontier |
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Opportunity Cost |
The amount of one good we sacrifice to not produce in order to produce more of another good |
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Opportunity cost of producing one good is the inverse opportunity cost of producing one of the other goods |
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Why does the PPF bound outward |
Since resources are not equally productive in all activities. Means that as the quantity produced of each good increases, so does its opportunity cost |
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Marginal Cost |
The opportunity cost of producing one more unit of a good or service |
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Preferences |
A description of a persons likes and dislikes |
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Marginal benefit |
is the benefit received from consuming one more unit of it |
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Marginal benefit is measured by... |
the amount that a person is willing to pay for an additional unit of a good or service |
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Principle of decreasing marginal benefit |
The more we have of any good, the smaller is its marginal benefit and the less we are willing to pay for an additional unit of it |
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Allocative Efficiency |
Occurs when goods and services are produced at the least possible cost and in the quantities that bring the greatest possible benefit - Cannot produce more of any one good without giving up some other good that we value more highly - producing at THE point on the PPF that we prefer above all other points - MB=MC |
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Economic Growth |
The expansion of production possibilities - and increase in the standard of living |
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Two key factors influence economic growth |
- Technological change - Capital accumulation |
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Technological Change |
The development of new goods and of better ways of producing goods and services |
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Capital Accumulation |
The growth of capital resources, which includes human capital |
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What is the opportunity cost of economic growth |
Less current consumption |
