Scarcity & Choices
What is scarcity?
Unlimited wants but limited resources.
What does PPC stand for?
Production Possibilities Curve.
What is opportunity cost?
The next best alternative given up.
What is absolute advantage?
The ability to produce more of a good using the same resources.
What is demand?
The amount consumers are willing and able to buy.
What are the 4 factors of production?
Land, labor, capital, and entrepreneurship
What does a point inside the PPC show?
Inefficiency or underused resources.
If you go to a concert instead of working, what is one possible opportunity cost?
The money you would have earned from working.
What is comparative advantage?
The ability to produce a good at a lower opportunity cost.
What is the law of demand?
As price rises, quantity demanded falls.
What does it mean to make a trade-off?
Giving up one thing to get something else.
What does a point outside the PPC show?
It is currently unattainable.
If a country uses more resources to produce cars, what usually happens to production of other goods?
It decreases because resources are limited.
Who should specialize in producing a good?
Whoever has the lower opportunity cost.
What is supply?
The amount producers are willing and able to sell.
Why does every economy have to answer basic economic questions?
Because resources are scarce.
What causes a PPC to shift outward?
More resources, better technology, or economic growth.
On a PPC, what does movement along the curve show?
A trade-off between producing two goods.
Can one country have an absolute advantage in both goods?
Yes.
What is the law of supply?
As price rises, quantity supplied rises.
What are the 3 basic economic questions?
What to produce, how to produce, and for whom to produce.
Why is the PPC usually bowed outward?
Because opportunity cost increases as more of one good is produced.
What does increasing opportunity cost mean?
Producing more of one good requires giving up larger amounts of the other good.
Can one country have a comparative advantage in both goods?
What is equilibrium?
The point where quantity demanded equals quantity supplied.