Scarcity
What is economics the study of?
Choices & scarcity of resources
What does a point on the PPC represent?
Efficiency/Efficient
This is what a producer has when they have the lowest opportunity cost
Comparative Advantage
What is the law of demand?
Inverse/negative relationship between price & quantity demanded
What are the three shifters of the Production Possibilities Curve?
Change in trade, change in resources, change in technology
If two countries are trading inside of their PPC curve, what can they do to move a point along the curve?
Increase allocation of resources; become more efficient
What is the relationship between demand and the movement of the equilibrium price & equilibrium quantity?
Direct. If demand falls, equilibrium price & quantity also fall.
Land, Labor, Capital, Entrepreneurship
This law says as you produce more of a good, the opportunity cost will increase
Law of Increasing Opportunity Cost
Millie can make a loaf of rye bread in 2 hours or a pan of muffins in 1 hour.
Merle can make a loaf of rye bread in 3 hours or a pan of muffins in 1/2 an hour.
Who has the absolute advantage in a loaf of rye bread? EXPLAIN.
Millie. She has the least amount of hours it takes to make a loaf of bread.
If the price of popcorn increases, what happens to quantity supplied of popcorn?
It also increases along the curve.
What is the difference between opportunity cost and trade-offs?
Opportunity cost: most desirable alternative given up in choices
Trade-off: All alternatives that are given up in choices
If the population of Ireland increased, how would this affect the PPC?
Outward (right) Shift of PPC
Why should countries agree to terms of trade?
To specialize & trade, gain more product, lower opportunity cost, get gains from trade.
Supply, shifts right, change in technology
Making decisions based off additional costs or benefits to yourself
What are the 4 key assumptions of the PPC?
Only 2 goods can be produced, full employment of resources, fixed resources, & fixed technology
US| 10 ships or 20 tanks
UK| 20 ships or 5 tanks
Who has the comparative advantage in ships? EXPLAIN
UK|1s= 1/4t is smaller than 1s= 2t
20 x 20= 400 versus 10 x 5 = 50
What is the difference between quantity demanded/supplied & an increase/decrease of supply/demand?
Quantity supplied/demanded deals with the increase/decrease of price along the curve; increase/decrease in demand/supply shifts the curve entirely.