1.3-1.4 opportunity cost Flashcards
(12 cards)
definition of opportunity cost
next best alternative foregone when a choice is made,affects all economic agents
what is an economy?
area where economic activities of production,exchange and consumption occurs
what is a production possibility curve
maximum possible combined amount of two types of goods an entire economy can produce with its resources
Assumptions made for a ppc
resources fully employed and level of technology stays the same
Why is ppc useful at showing opportunity cost
as resources are scarce,producing more of one good means less of the other,demonstrating opportunity cost
why are ppc downward sloping
shows that there is opportunity cost
Why is shape concave
resources are not perfect substitutes,more time and effort spent to find a suitable factor input to make product
when a point is below ppc
resources not fully used,workers unemployed,farmland idle,happens during recession
why a point is in a unattainable position(outside ppc)
quantity of resources and level of technology cannot produce these amount of goods
what causes a rightward shift in ppc?
increase in quantity of resources
increase in quality of resources
increase in levelof technology
What causes a leftward shift of ppc
fall in quantity of resources,fall in quality of resources and a drop in level of technology
