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11 Cards in this Set
- Front
- Back
- 3rd side (hint)
Opportunity cost
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The value of the next best alternative forgone when a decision is made
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Decision is made
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PPF |
Shows the maximum combinations of goods or services that can be produced in a set period of time given available resources, when all resources are fully employed. |
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Why does a PPF concave to the origin
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-There isn't a perfect of mobility between the resources (e.g. re-allocating capital and labour resources from 1 industry to another may require retraining, also financial cost of moving resources)
-There's not a perfect factor of substitutabilty between resources (some resources are more useful in one use than another, also increasing marginal rate of substitution) |
Finacial and some resources are more in one use than another
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PPF shifting outwards
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-Investment (more capital)
-Techological development (better capital) -Education and training (labour skills) -Increased labour participation (inventives to work) |
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Points outside the PPF
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Points outside the curve are not attainable with the current level of resources
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Points inside the PPF
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Suggests resources are not being fully utilised
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What's the PPF useful to demonstrate?
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Economic growth and oppurtunity cost
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What does a straight line indicate on a PPF
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Resources used to produce the two goods are perfectly homogeneous and there's a perfect factor of mobility and constant opportunity cost
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A skewed line on a PPF suggests?
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-New tech
-Investment -Improved production systems |
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Inward shift on a PPF?
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-War
-Natural disasters -Complete lack of investment |
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AN ECONOMY'S RESOURCES |
-Land =natural resources -Labour = human resources -Capital = tools and machinery used in the process of making goods/services -Enterprise = the risk taker, organises the three other factors to create goods/services |
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