Micro Chapter 1: PPC

Allocative Efficiency

the production of the combination of products that best satisfies consumers’ demands

Capital

the human-made resource that is used to produce other products

Consumer goods & services

products that are used by consumers to satisfy their wants and needs

Enterprise

the human resource of entrepreneurship and innovation

Factors of Production

the resources used in the production of goods and services, typically categorized as land, labor, capital, and entrepreneurship.

Interest

The payment made and the income received for the use of capital

Law of Increasing Costs

the idea that when an economy’s production level of something increases, the per-unit cost of production increases (due to increasing scarcity, higher costs)

Opportunity Costs

the value of the next-best alternative that is given up from choosing the first choice

Normative statement

a subjective claim about how things ought to be, often based on personal beliefs or opinions.

Positive statement

a statement that is factual and can be verified

Production Possibilities Curve

a graph that illustrates the trade-offs between two goods, showing the maximum possible production of each with given resources

Productive Efficiency

the production of an output and the lowest cost possible (reap as much benefit, e.g. intensive farming)

Allocative Methods

5 Types: Lottery, Sellers’ preference, gov’t decree, first come first serve, the market

Cooperative Economies

People collaborate and work together (e.g. native americans)

Command Economies

Communism (USSR)

Customary Economies

Traditional, religious (e.g. subsistence farming)

Competitive Economies

Market economies (farmer’s market)

Concave shape for PPC

two different goods compared

Linear shape for PPC

two similar goods compared

Economic growth

is the increase in the production of goods and services in an economy over time, often represented by an outward shift in the Production Possibilities Curve (PPC). More resources, better technology, improved Human Capital, discovery of raw resources, more trade