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.