econ

Scarcity

A situation where available resources (factors of production) are limited while human wants are unlimited

The basic economic problem

How to allocate scarce resources among competing uses in order to satisfy unlimited wants.

Choice

The necessity of selecting between alternatives because resources are scarce.

Opportunity cost

The value of the next best alternative forgone when a choice is made.

Land

all natural resources used

Labour

physical and mental work and skill people put into producing goods and services

Capital

human made resources used to produce goods and services

Entrepreneurship

risks into a business in the hope of profit

Production Possibility Curve

A curve that shows the maximum combinations of two goods an economy can produce when all resources are fully and efficiently employed, given current technology.

Free good

A good that is not scarce and therefore has zero opportunity cost.

Actual growth

An increase in output shown my movement from inside the ppc onto the ppc

Potential growth

An increase in productive capacity shown by the outward shift of the ppc

Why opportunity cost exists

Because of scarcity. Resources are finite and wants are infinite so a choice must be made. The next best alternative is forgone.

Why point inside is inefficient

Some resources are unemployed or unused so the economy is producing below is maximum output

Why is the PPC concave

Because of its increasing opportunity cost. Resources are not equally suited for both goods so increasing amounts of one good must be sacrificed to produce more of the other.

Actual vs potential growth

Actual growth inside and into the curve so unused resources become employed

Potential growth is the whole curve shifts outwards by better resources or better technology