Create an account
the science of efficiency; concerned with allocating these scarce resources so as to achieve maximum fulfillment of our material wants
the least costly method of production is being used to produce the desired goods and services
the amount of products that must be forgone in order to obtain an additional unit of any given product
production possibilities curve
a graphical representation of the boundary between what is attainable and what is not
four assumptions of PPC
(1) the economy is fully efficient meaning that it is operating at full production and full employment; (2) resources are fixed; (3) technology is fixed; and (4) there are only two products.
shift to right of PPC
indicates economic growth (society found more resources or developed better technology)
items that satisfy wants indirectly by facilitating the production of consumer goods; economic growth is dictated by a society's production of capital goods
a system of private ownership of resources using free markets and prices to determine economic activity; little government involvement
meaning, 'let it be,' this is a term that indicates little government involvement in the economy
a communist economy; the government determines what is produced and in what quantities and at what price
most economies are not completely laissez-faire and not completely command, but some mixture
custom and culture define how resources are produced and exchanged and how income is distributed, and technology is viewed as invasive
amount of a good or service that consumers plan to buy in a given period of time and in given conditions
factors influencing demand
(1) the price of the good; (2) the prices of related goods; (3) expected future prices; (4) income; (5) population; and (6) preferences
Law of Demand
the higher the price, the lower the quantity demanded. the lower the price, the higher the quantity demanded.
if a similar good is priced more cheaply, people will buy the cheaper substitute instead of the good itself (Coke, Pepsi; bananas, strawberries)
at a lower price, people will buy more of a particular good because they do not have to sacrifice other goods at its expense
change in demand
when something other than price changes a demand, the demand curve shifts left or right
factors determining supply
1) the technique of production; (2) prices of resources needed to produce the good or service; (3) taxes and subsidies; (4) prices of other goods; (5) price expectations; and (6) the number of other sellers in the market.
Law of Supply
as price rises, the corresponding quantity supplied also rises and likewise when the price falls, the quantity supplied decreases
change in supply
when something other than price changes in supply, the supply curve shifts left or right
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