Economics Quiz 1

Economics

social science which studies how people/businesses/countries choose to allocate its scarce resources to the production of goods and services to fulfill unlimited wants.

The Scarcity concept

Defined as a shortage. Basically, unlimited wants exceeding limited resources. It creates choices that people have to make to determine what is most important.

Factors of Production

Inputs available for the supply of goods and services in the economy. Meaning, resources that are used to produce a good or service.

The Production Possibility Frontier

shows the maximum combinations of goods and services that can be produced within a given time period when all resources are fully and efficiently used.

Scarcity

resources are limited so an economy cannot produce everything it wants

Choice

different points on the curve represent different combinations of good that must be chosen between

Opportunity cost

producing more of one good means giving up some of another.

On the curve

efficient production (maximum output)

Inside the curve

inefficient (unused or wasted output)

Outside the curve

unattainable with current resources (shows scarcity)

Concave shape

movement along the PPF represents trade-offs where increasing production of one good reduces the other.

Outward

due to economic growth, more resources, or technological improvements (greater production capacity)

Inward

due to loss of resources such as natural disasters

Unevenly

when technology improves production of one specific good , making the PPF a key model for understanding trade-offs, efficiency, resource allocation.

Trade-off

producing one means you cannot produce the other due to scarcity