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Absolute advantage – Person A has an absolute advantage over Person B if A takes fewer hours
to perform a task than Person B
Opportunity cost – the value you have to give up in order to undertake the activity
Production possibilities curve – a graph that describes the max amount of one good that can be
produced for every possible level of production of the other goods
Attainable point – any combination of goods that can be produced using currently available
resources
Inefficient point – any combination of goods for which currently available resources enable an
increase in the production of one good without reduction in producing the other good
factors that enhance long-run economy growth will shift the PPC outward
-population growth
-invest in new capital goods (like machines or factories)
-improvement in knowledge and technology
- the prices and quantities of goods and services are determined by interactions in the market
-demand curve graphs the quantity of a good that buyers wish to buy at each price
-buyer’s reservation prices – the largest dollar amount the buyer is willing to pay for the goods
-seller’s reservation price – the smallest dollar amount the seller would be willing to charge for
an additional unit of the good
-when the market is in equilibrium, no incentive to move away from the equilibrium
-Changes in demand
-when there is an increase in demand, the demand curve shifts to the right
-when there is a decrease in demand, the demand curve shifts to the left
-changes in supply
- when there is an increase in supply, the supply curve shifts to the right
- when there is a decrease in supply, the supply curve shifts to the left