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7 Cards in this Set
- Front
- Back
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Opportunity cost |
It is the value of the next best alternative forgone |
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Trade off |
A sacrifice that must be made to get a certain product or service |
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What is meant by Production Possibility Frontier |
A curve showing the maximum combinations of goods or services that can be produced in a set priod of time given available resources |
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Factors causing the PPF curve to shift rightwards |
Investment in capital Inward migration of younger Discovery of new resources Improved education, training and healthcare to lift labour productivity Innovation that increase output per unit and reduce wastage |
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Factors that shift PPF leftwards |
Economic shrink due to a failure in the allocation of resources and optimal production capability |
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How does PPF illustrate scarcity, choice, opportunity cost and productive efficiency |
Point outside the curve represents scarcity Point on the curve represents productive efficiency A movement on the PPF curve represents choice A point inside the PPF curve represents productive inefficiency The PPF curve represents how much of the output of one product is lost when production moves towards another product |
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How usefull is the concept of opportunity cost |
It is usefull in determining relative prices of different goods, fixing the price of a factor, and efficiently allocating resources. However, it is very specific and cannot be put to alternative uses. It also rests on the assumption of perfect competition. |
