Studied by 0 peopleScarcity
unlimited wants exceed limited resources available
Production Possibilities Frontier (PPF)
a curve showing the maximum attainable combinations of two goods that can be produced with available resources and technology
PPF is a positive or normative tool?
Positive, it shows “what is”
Which point is attainable?
ABCDEF
Which point is efficient?
ABCDE
Which point is inefficient?
F
Which point is unattainable?
G
Opportunity cost
highest-valued alternative that must be given up to engage in an activity
Economic growth
ability of the economy to increase the production of goods and services
Factor markets
Household receive payment by selling to firms
Product markets
Firms supply goods and services
Households buy these products from the firms
Circular-flow diagram
Model that illustrates how participants in markets are linked
Households provide
Factors of Production to Firms
Firms provide
Goods and Services to Households
Firms pay money to
Households for the Factors of Production
Households pay money to
Firms for the Goods and Services
Circular flow diagram - simplified version of reality
no government
no financial system
no foreign buyers and sellers of goods
Free market
few government restrictions
Entrepreneurs contribution to economic growth
responding to consumer demand
introducing new products
Government policies encouraging Entrepreneurship
Increase economic growth
Raise standards of living
Note
Flashcard