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Studied by 21 peopleNoteStudied by 16 peopleNoteStudied by 27 peopleNoteStudied by 5 peopleNoteStudied by 53 peopleNoteStudied by 5 peoplePPF- productive possibility frontier - N
>Free market vs Command Economy (fact leaflet in folder)
The PPF curve is on a graph that illustrates the possible quantities that can be produced of two products if both depend upon the same finite resources for their manufacture.
Assumptions
An economy chooses to produce these two products
There are limited resources
Technology and techniques remain constant
All resources(FOP) are fully and efficiently used
When moving from A to B you experience an opportunity cost of gaining good x but losing good y, if good y decreases from 50→30 and good x increases from 40→60 then thats the opportunity cost. Also, if we move again from B to C the increase of good x might still be 20, going up to 80, but the decrease for good x has increased going from 30→10. this is because as they gain more FOP suited for making good x they lose more and more FOPs suited for good y decreasing it even more. This is called the law of increasing opportunity cost.
Scarcity: the maximum that can be produced
Choice: A,B,C
opportunity cost: by changing from point A to point B you gain wine but you lose apples
D= resources (FOP) aren’t being fully used e.g. unemployment, idle factories, unused land etc
F= impossible with the current FOP that we have
Free market economics | Command economics (communist views) | |
|---|---|---|
Characteristics | No government intervention in the economic system including no legislative control over employment, production or pricing | Government control no competition, authority, budget allocation, prioritisation, mobilisation of resources and a unique vision. by the counters governing body no profit/no private property |
Benefits | It contributes to political and civil freedom, in theory, since everybody has the right to choose what to produce or consume contributes to economic growth and transparency ensures competitive markets | low or non-existent unemployment speed in decision making equality amongst citizens and a focus on the workers as opposed to profits |
Problems | subject ti manipulation, misinformation, asymmetries of power and knowledge and foster wealth inequality | lack of efficient resource allocation lack of innovation and the needs/preferences of society may be ignored due to poor planning (Rob’s trip to Poland) |
NoteStudied by 21 peopleNoteStudied by 16 peopleNoteStudied by 27 peopleNoteStudied by 5 peopleNoteStudied by 53 peopleNoteStudied by 5 people