Unit 1A - Introduction to Economics. Kognity 1.1.3 (Production Possibility Curves)
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11 Terms
Production Possibility Curve
The curve that shows the maximum combination of goods a country can produce in a specific period of time, using all of its resources and the available technology in the most efficient way. It is also called the production possibility frontier.
Constant Opportunity Cost
A situation where the opportunity cost remains unchanged as more units of a particular good are produced. This implies that resources are equally efficient in producing different goods
Increasing Opportunity Cost
As the production of one good increases, the opportunity cost to produce the additional good will increase.
Capital goods
The physical capital stock used to produce goods and services. It includes all manufactured (human-made) resources, such as machines, factories, roads and tools. Physical capital is also referred to as capital goods or investment goods.
Consumer goods
Finished products that are ready for satisfying people's wants, not used in any further production process.
Diminishing returns
The principle that adding more of one factor of production (input), while holding at least one other factor of production constant, will at some point yield lower marginal returns (output/product).
Productive efficiency
When output is produced using the fewest possible amount of resources; when output is produced at the lowest possible cost.
Actual Output
The total amount of goods and services that an economy is producing at a certain moment in time.
Potential Output
The total amount of goods and services that an economy can produce when all of its available resources are being used efficiently.
Actual growth
When an economy produces a greater amount of goods and services in one period of time than in a previous one.
Potential Growth
When the production capacity of an economy increases from one period to another. It means that the maximum amount of output that an economy can produce when all of its resources are being used efficiently increases.