Mic

• 4 factors of production

  • Resources
  • Capital
  • Enterprise
  • Land
  • Labour
• Factors of production


  Resources combined together produce goods and services
• Opportunity cost


  The cost of the alternative when a choice is made
• Opportunity cost is the value of the choice not made, if a poor choice is made
• Basic economic problem


  How to allocate scarce resources
• Choices that have to be made

  • What to produce
  • How to produce
  • For whom to produce
• Production Possibility Frontiers (PPF)

  • Shows the maximum possible productive capacity of 2 goods/services with given factors of production
  • Shows the various combinations of the 2 goods/services that can be produced with the given factors of production
• Productive efficiency


  Using up all factors of production to maximum level
• Allocative efficiency


  Where what is being produced satisfies consumer demand
• Points on the PPF curve

  • a - basic productive efficiency
  • b - productive efficiency
  • d - productive inefficiency
  • e - unattainable (can't produce beyond curve)