Economic Concepts — Scarcity, PPF and Related Terms (Vocabulary Flashcards)

A set of vocabulary-style flashcards covering the key terms from the video notes on scarcity, the economic problem, and the Production Possibility Frontier (PPF).

Scarcity

The state in which resources are limited relative to unlimited wants, forcing choices about how to allocate resources.

Shortage

A temporary condition where the quantity supplied is insufficient to meet demand at current prices; often due to limited supply.

Needs

Goods or services that are required for survival (e.g., food, shelter).

Wants

Goods or services that are desired but not essential.

Economic Problem

Scarcity and choice; the central issue of how to allocate limited resources to satisfy unlimited wants.

Production Possibility Frontier (PPF)

A curve showing the maximum feasible combinations of two goods that an economy can produce with given resources and technology; illustrates trade-offs and efficiency.

Opportunity Cost

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

Factors of Production

The inputs used to produce goods and services: land, labour, capital, and enterprise.

Land

Natural resources and materials provided by nature used in production (e.g., rivers, forests, minerals).

Labour

Human effort used in production; the workforce and its productivity.

Capital

Man-made resources used in production, such as machinery, tools, factories, and infrastructure.

Enterprise

Entrepreneurial ability; the drive to organize production and combine the other factors; includes risk-taking.

Economic Growth

An outward shift of the PPF indicating increased productive capacity due to more resources or better technology.

Microeconomics

The study of the economic problem at the individual level—consumer and producer decision making.

Macroeconomics

The study of the economy as a whole—overall performance and indicators.

Ceteris Paribus

Latin for 'all other things being equal'; the assumption that other relevant factors remain constant.

Efficiency (on the PPF)

A point on the PPF where resources are fully utilized and production is maximized given the resources.

Inefficient (inside PPF)

A point inside the PPF where resources are underutilized or not used efficiently.

Unattainable/Outside PPF

Points outside the PPF that cannot be produced with current resources and technology.

Technology

Knowledge and methods that improve production; improvements can shift the PPF outward.

Shifting the PPF

An outward shift occurs when productive capacity increases due to more resources or better technology.

Assumptions of the PPF

The model assumes full and efficient use of resources, only two goods are produced, resources can fully switch between the two goods, technology and resources are fixed.

Concavity of the PPF

The PPF is bowed outward because resources are not equally well suited to producing all goods; increasing production of one good requires increasingly more of the other.

Opportunity Cost in business decisions

Because resources are scarce, businesses must choose how to allocate them to maximize profits; this choice incurs opportunity costs.