Economics ca + aa

What is the law of comparative advantage?

As long as there a different opportunity costs, its possible for countries to gain from specialisation.

Allocation

Choosing between two resources

What is needed to start up an economy

Land (raw) Labour (employees) Physical capital (man made) Enterprise (factors of production

Scarcity

Limited resources + unlimited wants

What is a PPC

Production possibility curve

What is under allocation

Something that doesn't have enough priority

What is over allocation

Something which is being over produced that isn't that important

What is opportunity cost

The resource you didn't choose and also the next best alternative after your decision

What happens after economies specialise?

They can produce outside of their PPC

What happens to the production of goods under autarky?

They share the resources (50/50)

What are the three questions economies ask?

What to produce How to produce it For who

Absolute advantage

When an economy can produce more than another using the same resources

Autarky

When an economy is self dependent, no trade with another economy

Comparative advantage

When one country's opportunity cost is lower in the production of a good than another country