MIcro-Econ Ch.2 Vocab

Production Possibilities Frontier (PPF / PPB)

A graph that shows the combinations of output that the economy can possibly produce given available factors of production and technology, representing the best an economy can do if resources are used efficiently

Resource Endowment

The total amount of resources an economy has available at a given moment

Productive Efficiency

A state achieved when an economy produces at a point directly on the PPF curve, utilizing all available resources efficiently given current technology

Social Efficiency

A state achieved when an economy produces the specific combination of goods on the PPF that society actually wants. (Note: Referred to as "allocative efficiency" in standard microeconomics text)

Overall Economic Efficiency

A condition requiring both productive efficiency (operating on the PPF curve) and social efficiency (producing society's desired output mix)

Constant Opportunity Costs

A situation where an economy gives up the exact same amount of one good to produce additional units of another good at a fixed rate

Increasing Opportunity Costs

A situation where producing more of a good requires giving up progressively larger amounts of another good, resulting in a bowed-out PPF curve