The central economic problem
Allocative Efficiency
The allocstion of resources to produce the combination of goods and services most wanted by society l(where social's welfare is max)
comparative advantage
to have it is in the production of a good when it is able to produce the good at lower opporurnity cost than another country
what are the factors of production(economic resources)
Land Labour Capital Entreprenuership
what is firms' objective when making choice
Maximise profits
marginal cost and benefits
the increase in total cost/benefit that arises from producing or comsuming an ADDITIONAL unit of good or service
what is the government's objectice ehen mskijg a choice?
the economic efficiency and equity social welfare
what are the common economic agents
1. Household/consumer 2. Firms/Producer 3. The government
What are the assumption of PPC
1. There is a fixed amt of factors of production 2. Factors of Production are fully snd efficiently utilised 3. The level of technology is constant 4. Only two goods
Diff between actual potential growth defi and potential growth defi
AG: actual i crease in production of goods and services PG:increase in productivie capacity of an economy to produce more goods and services
what is PPC and what isit
Production Possibility Curve. a diagram that shows all combinations of the maximum quantities of two goods that can be produced by an economy with given amount of resources fully and efficiently employed at a given state of tech
positive economic
describes and explaineconomic phenomena ,focusing on fscts and cause-and-effect relationship such as value-free(objective) eg. govt reduce tax to 16%
normative economic
expresses value judgement which cannot be proven true or false (subjective)
what is household's objective when making choice?
maximise utility
Opportunity cost
refers to the NET BENEFIT thet coukd have been derived from the next BEST alternstive when a choice is made.
Productive Efficiency
situation which all availablr resources are fully and effciently employed to achieved max outlut possible.