1 Central Problem of Economics

Assumptions of PPC

1. Two types of goods produced 2. Fixed amount of resources that can be shifted among different uses 3. Economy is operating efficiently and at fully employment 4. State of technology is fixed during the specified time period

Opportunity Cost

it is the cost of any action or decision measured by the next best alternative forgone

Productive Efficiency

occurs when output is maximized for a given amount of input

Allocative Efficiency

occurs when society produces and consumes a combination of goods & services that maximised welfare

Production Possibility Curve (PPC)

shows the maximum attainable combinations of output that a country can produce within a specified time period, with all of its resources fully and efficiently employed, at any given state of technology