[E] Central Problem of Economics

Law of increasing opportunity cost

As more of a particular good is produced, larger and larger quantities of the alternative good must be sacrificed; opportunity cost of production increases

Actual growth

Expansion of an economy's current output over time

Potential growth

Expansion of an economy's productive capacity over time

Economic growth

Expansion or increase in an economy's level of output or GDP over time

Opportunity cost

Measures the cost of making a choice, in terms of the next best alternative forgone

Choices

Resources are scarce, they have alternative uses, economic agents must make choices among alternative uses to maximise use of resources to achieve highest possible level of satisfaction

Production possibility curve

Shows all the different maximum attainable combinations of goods and services that can be produced in an economy, when all resources available are fully and efficiently used at given state of technology

Scarcity

Situation where limited resources available are unable to satisfy unlimited human wants

Shortage

Situation where supply is insufficient to meet demand