Nature of Economics

The PPF represents the maximum possible output combinations of two goods or services that an economy can produce given its resources and technology.

Efficiency in the PPF context refers to using resources optimally to achieve maximum output with minimal waste.

Factors include improvements in labor productivity, technological advancements, better education, population growth, and discovery of new resources.

<p>Opportunity cost refers to the value of the next best alternative that is forgone when choosing to produce one good over another.</p> Signup and view all the answers

<p>A production point is unattainable when it lies outside the PPF curve, indicating that the economy lacks sufficient resources or technology to produce that output.</p> Signup and view all the answers

<p>It represents a decrease in the economy's productive capacity.</p> Signup and view all the answers

<p>The economy produces only two goods and the amount of resources is fixed.</p> Signup and view all the answers

<p>Economic decision refers to the process of making choices on how to use resources efficiently for optimal outcomes.</p> Signup and view all the answers

<p>The bandwagon effect leads consumers to increase demand for a product as they see others doing the same.</p> Signup and view all the answers

<p>Production is the process of creating goods and services, while productivity measures the efficiency of that production process.</p> Signup and view all the answers

<p>Factors of production are resources needed to produce goods and services, and they are crucial for determining resource allocation in an economy.</p> Signup and view all the answers

<p>Land includes all natural resources used in production, such as minerals, forests, water, and oil.</p> Signup and view all the answers

<p>Costs of production and changing demand for products.</p> Signup and view all the answers

<p>Agricultural, industrial, and commercial land.</p> Signup and view all the answers

<p>Essential for performing tasks and contributes to innovation and efficiency.</p> Signup and view all the answers

<p>Physical capital includes machinery and tools, while financial capital refers to money used to purchase physical capital.</p> Signup and view all the answers

<p>Land earns rent, labor earns wages, capital earns interest, and entrepreneurship earns profit.</p> Signup and view all the answers

<p>In a capitalist economy, production and distribution are owned by private individuals or businesses, with prices determined by supply and demand.</p> Signup and view all the answers

<p>A command economy is controlled by the government, making most economic decisions, whereas a free market economy relies on private ownership and supply and demand.</p> Signup and view all the answers

<p>Entrepreneurship is the ability to establish, manage, and grow a business to achieve profit.</p> Signup and view all the answers

<p>Salary is typically a fixed amount paid monthly, while wages are often paid based on hours worked, usually every two weeks.</p> Signup and view all the answers

<p>It is characterized by people producing goods mainly for their own consumption, relying on farming, hunting, and gathering.</p> Signup and view all the answers

<p>In a mixed economy, both private individuals and the government play a role in resource allocation and economic decision-making.</p> Signup and view all the answers

<p>Resource allocation is the process of assigning scarce resources to produce different goods and services to meet societal needs and wants.</p> Signup and view all the answers

<p>Merit goods are beneficial to society, like education and healthcare, while demerit goods are harmful, such as cigarettes and alcohol.</p> Signup and view all the answers

<p>Barter is a system of exchange where goods and services are traded directly without the use of money.</p> Signup and view all the answers

<p>The short run is a period when at least one factor of production remains fixed, limiting changes in production levels.</p> Signup and view all the answers

<p>Fixed factors cannot be varied in the short run, while variable factors can be adjusted to change production levels.</p> Signup and view all the answers

<p>It is the sum of payments for all factors used to produce goods and services.</p> Signup and view all the answers

<p>Economics is the social science studying production, distribution, and consumption of goods and services, while an economy refers to the system that facilitates these processes within a society.</p> Signup and view all the answers

<p>Microeconomics focuses on individual and business decision-making processes, whereas macroeconomics looks at the economy as a whole and addresses large-scale economic issues.</p> Signup and view all the answers

<p>The three main economic agents are households, which supply labor and consume goods; firms, which produce goods and services; and governments, which provide services and implement economic policies.</p> Signup and view all the answers

<p>Scarcity refers to the situation where demand exceeds supply, leading to limited availability of resources, which forces individuals and economies to make choices about resource allocation.</p> Signup and view all the answers

<p>Opportunity cost is the value of the next best alternative that is forgone when a choice is made, highlighting the trade-offs that come with every economic decision.</p> Signup and view all the answers

<p>Goods are tangible products that can be seen and touched, like a car, while services are intangible activities like haircuts that benefit consumers.</p> Signup and view all the answers

<p>Free goods are abundant and do not require scarce resources to obtain, while economic goods are scarce and require resources for production.</p> Signup and view all the answers

<p>The three economic questions are: What to produce? How to produce? For whom to produce?</p> Signup and view all the answers