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19 Cards in this Set
- Front
- Back
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Define ppc |
Production frottier curve represents are combinations of maximum amounts of two goods produced by an economy, given its resources and technology, when there ks full employment of resources and efficiency in production. |
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What are the two conditions for ppc |
All resources must be fully employed All resources must be used efficiently |
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Do economies achieve to be on a point in the ppc |
No in really world economies, there is some unemployment and some inefficiency in the use of resources. This they are usually on a point inside the ppc. The more the unemployment and inefficiency, the further it is from the ppc. |
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How does ppc represent concepts of scarcity, choice and opportunity cost. |
Scarcity: With its fixed quantities and fixe d resources, society cannot produce outside its ppc. This is because it does not have enough resources, or there is a scarcity of resources. Choice: because there is scarcity the economy must make a choice on which point it would like to produce on the ppc ( what combination of maximum amount of two goods it wants to produce) Opportunity cost: because of scarcity choice involves opportunity cost. If an economy wants to move from one point to the other, it has to produce more of one product and less of the other. The other good becomes the opportunity cost of increasing the first good. |
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What does the shape of the ppc indicate in this |
It represents constant opportunity costs in a ppc. This happens when the factors of production of both goods are suited for each other. Opportunity costs are constant |
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What does the shape of this ppc indicate |
It indicates a ppc with increasing opportunity costs. As production shifts from microwave oven to computers, it is necessary to give up increasingly more microwave ovens for every additional unit of computers produced. This is because factors of production become specialised, and the factors of production for the computers will not be suited to produce microwave ovens. |
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When can an economy move closer to its ppc |
When there is less unemployment and more efficient use of the factors of production (causes of actual growth) |
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When does growth in production possibilities happen? |
Increase in quantity of resources Increase in quality of resources Technological improvements. |
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A free market economy is based on what approach? What is a planned economy based on? |
Free market- market approach Planned- command |
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What is a public sector and a private sector, and which is applied for the two types of economy. |
Public sector refers to the parts of the economy which are under the ownership of the government. Private sector refers to the parts of the economy which are under private individuals or groups. A free market economy has private sector resource ownership and a planned economy has a public sector resource ownership. |
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How can planned and free market economies be differentiated on the bases of economic decision making. |
A free makelst economy has private sector economic decision making and a planned economy has a public sector economic decision making. |
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How can price rationing differentiate between the two types of economies |
Free market economies use price rationing Planned economies use non-price rationing |
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Define efficiency |
It is the best possible use of resources to avoid any resource waste |
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What is interdependence in an economy |
It refers to the concept that different decision makers interact with and depend on each other. It rises from the fact that no one is self sufficient. |
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What is scarcity |
Scarcity is a situation where available resources are finite (factors of production are finite) but wants are infinite. It forces choice as societies are forced to make choices between different alternatives. |
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What is sustainability |
Sustainability refers to maintaining the ability of the environment to produce and satisfy needs and wants if the future. It depends on sustainable resource use. |
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What are the four factors of production |
Land: all natural resources- agricultural and non agricultural Labour: all physical and mental effort people contribute in the production of a good or service Capital: it is a man made factor of production used to produce other goods and service Entrepreneurship: it is a special skill possessed by some people to innovate by finding new ways to do things. |
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What is opportun cost? |
Opportunity cost is the value of the next best alternative that must be sacrificed in order to obtain something else. |
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What is a free and economic good? |
A free food is a good which is not scarce and has zero opportunity cost. An economic good is a good which is scarce either because it occurs naturally scarce or because it is produced using scare resources |
