Economics Lecture: Scarcity, Production Possibilities Frontier (PPF), and Basic Investment Concepts

Vocabulary flashcards covering scarcity, the production possibilities frontier, opportunity cost, growth, investment, and related macroeconomic concepts discussed in the lecture.

Production Possibilities Frontier (PPF)

A curve showing the maximum feasible output combinations of two goods that an economy can produce with given resources and technology, illustrating scarcity, trade-offs, and opportunity costs.

Scarcity

The condition of limited resources relative to unlimited wants, forcing trade-offs in production and consumption.

Opportunity Cost

The next-best alternative foregone when a choice is made; in a PPF context, the slope represents this cost.

Slope (Marginal Rate of Transformation)

The rate at which one good must be sacrificed to produce more of the other; the slope of the PPF (rise over run) indicates opportunity cost.

Production Efficiency

Producing on the PPF, using resources efficiently so that no additional output of one good can be obtained without reducing the output of the other.

Economic Growth

An outward shift of the PPF over time, representing an increase in an economy's productive capacity due to technology, capital, or resources.

Capital

Man-made inputs used in production, such as machinery, buildings, and equipment.

Investment (Economics)

Expenditure on capital goods that increases future productive capacity, such as new factories, equipment, or infrastructure.

Mutual Fund

A pooled investment vehicle that buys a diversified portfolio of stocks or other assets, managed by professionals to spread risk.

S&P 500

An index of 500 of the largest U.S. companies; a benchmark for the overall stock market and many mutual funds.

Diversification

Spreading wealth across different assets to reduce risk rather than concentrating in a single investment.

Inflation

A sustained rise in the general price level, eroding purchasing power of money over time.

FDIC (Federal Deposit Insurance Corporation)

A U.S. government institution that insures bank deposits (up to a limit, currently $250,000 per depositor per insured bank) to maintain confidence in the banking system.

Bank Run

A rapid withdrawal of deposits from a bank due to fears of failure, which can cause insolvency and broader financial instability.

Interest

The payment earned on deposits or charged on loans; banks typically pay interest on deposits and charge interest on loans.

Attainable vs. Unattainable Points

Points on or inside the PPF are attainable (possible with current resources); points outside are unattainable given current resources and technology.

Inefficiency (Inside the PPF)

Producing inside the frontier, meaning resources are not used to their full productive potential.

Economic Mechanism

The method by which an economy organizes production and allocation, for example markets versus centralized planning; affects efficiency and outcomes.