chapter 1 – IB Economics HL: Scarcity, Resources, and PPC

Vocabulary flashcards covering scarcity, resources, factors of production, economic systems, and the Production Possibility Curve (PPC) concepts from the notes.

Scarcity

Unlimited wants exceed available resources, forcing choices about how to use those resources.

Economics

The social science studying the efficient use of scarce resources to satisfy wants; often involves marginal decision-making.

Marginal Analysis

Evaluating the additional benefits and costs of a small, incremental change.

Price

The amount buyers pay to obtain a good.

Cost

The amount producers pay to make a good.

Investment

Money spent by businesses to increase future production capacity.

Capital Goods

Man-made goods used to produce other goods (tools, machines, factories).

Consumer Goods

Goods produced for direct consumption by individuals.

Land

Natural resources used in production (water, air, minerals, etc.).

Labor

Human effort used to produce goods and services.

Physical Capital

Man-made resources used to produce goods (equipment, buildings, etc.).

Human Capital

Skills and knowledge workers gain through education and experience.

Entrepreneurship

Ambitious individuals who organize the other factors to create goods/services; take risks and innovate.

Productivity

Output per unit of input; higher productivity means more output with the same resources.

Economic System

The method a society uses to produce and distribute goods/services and answer the three questions.

Allocation

Assigning factors of production to production tasks.

Distribution

How goods and services are divided among people or groups.

Centrally Planned Economy

Government owns the factors of production and makes economic decisions; limited consumer choice.

Free Market Economy

Private ownership, limited regulation, and production guided by price signals and profit motive.

Mixed Economy

A blend of market forces with some government intervention; some public goods and regulation.

Public Goods

Goods provided by the government that are non-excludable and non-rivalrous.

Taxes

Government charges used to fund public services and programs.

Subsidies

Government payments to producers to encourage production or lower costs.

Production Possibility Curve (PPC)

A frontier showing the maximum feasible combinations of two goods given resources and technology; illustrates scarcity, trade-offs, opportunity costs, and efficiency.

Opportunity Cost

The value of the next-best alternative forgone when making a choice.

Constant Opportunity Cost

A straight-line PPC where the trade-off between goods remains constant as production changes.

Increasing Opportunity Cost

A bowed-out PPC where opportunity costs rise as more of one good is produced because resources are not perfectly adaptable.

Shift in PPC

A change in the PPC position outward or inward due to changes in resources, technology, or trade.

Absolute Advantage

The ability to produce more of a good with the same resources than another producer.

Comparative Advantage

The ability to produce a good at a lower opportunity cost than another producer; basis for specialization and trade.