All Flashcards
What does a point on the PPC represent?
Efficient use of all resources in producing the two goods.
What does a point inside the PPC represent?
Inefficient use of resources or unemployment.
What does a point outside the PPC represent?
An unattainable level of production with current resources and technology.
What does a shift outward of the PPC represent?
Economic growth due to increased resources or improved technology.
What does a movement along the PPC represent?
A trade-off between the production of two goods; increasing production of one requires decreasing production of the other.
How does the shape of the PPC relate to opportunity cost?
A linear PPC indicates constant opportunity costs, while a bowed-out PPC indicates increasing opportunity costs.
Explain how technological advancements affect the PPC.
Technological advancements in one industry shift the PPC outward along the axis of that good, allowing more production.
How do changes in resource availability impact the PPC?
Increased resource availability shifts the PPC outward, enabling a higher potential output for both goods.
Describe the implications of operating at a point inside the PPC.
Operating inside the PPC signifies underutilization of resources, leading to lower overall production than possible.
How does trade affect a country's consumption possibilities relative to its PPC?
Trade allows a country to consume beyond its PPC by specializing in goods with a comparative advantage and exchanging them with other nations.
What is scarcity?
Unlimited wants but limited resources.
Define opportunity cost.
The value of the next best alternative foregone.
What is a Production Possibilities Curve (PPC)?
A graph showing maximum combinations of goods/services an economy can produce.
What is comparative advantage?
Ability to produce a good at a lower opportunity cost than competitors.
Define Demand.
The quantity of a good consumers are willing to buy.
What is Supply?
The quantity of a good producers are willing to offer.
Define Equilibrium.
The point where quantity supplied equals quantity demanded.
What is economics?
The study of how we allocate limited resources to satisfy unlimited wants and needs.
What is laissez-faire?
A system where markets allocate resources perfectly without intervention.
What are markets?
Places (physical or virtual) where buyers and sellers interact to exchange goods or services.
What are the differences between absolute and comparative advantage?
Absolute advantage is producing more with the same resources; comparative advantage is producing at a lower opportunity cost.
Differentiate between a change in demand and a change in quantity demanded.
Change in demand is a shift of the entire curve; change in quantity demanded is a movement along the curve due to a price change.
Differentiate between a change in supply and a change in quantity supplied.
Change in supply is a shift of the entire curve; change in quantity supplied is a movement along the curve due to a price change.
What is the difference between microeconomics and macroeconomics?
Microeconomics studies individual decisions; macroeconomics studies the economy as a whole.
What is the difference between positive and normative economics?
Positive economics is objective and fact-based; normative economics is subjective and value-based.
Compare and contrast a market economy and a command economy.
Market economy relies on supply and demand; command economy relies on central planning.
What are the differences between short-run and long-run in economics?
Short-run has fixed factors of production; long-run allows all factors to vary.
Compare and contrast efficiency and equity in economics.
Efficiency is optimal resource allocation; equity is fairness in distribution.
What is the difference between consumer goods and capital goods?
Consumer goods satisfy immediate wants; capital goods are used to produce other goods.
Compare and contrast economic growth and economic development.
Economic growth is an increase in output; economic development is broader improvement in living standards.