1.3: Opportunity Cost

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6 Terms

1
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Opportunity cost

The next best alternative forgone when a choice is made.

2
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PPCs and PPFs

The maximum possible combination of goods and services that are produced by goods and services that can be made with a given set of resources.

3
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Trade off

When one thing is lost to gain something else.

4
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Why are opportunity costs important for economic agents?

Because they cannot do both because of finite resources, so a choice has to be made for where resources are best spent.

5
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Capital goods

Goods that can be used to produce other goods, such as machinery.

6
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Consumer goods

Goods which cannot be used to produce other goods, such as clothing.