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MICROECONOMICS - Coggle Diagram
MICROECONOMICS
Economic Systems
Socialism
Economic decisions fully controlled by the government or central authority
Government decide social needs to optimize general welfare of citizens and country
Mixed Economy
An economic system which combines both capitalism and socialism
Private and public sectors work together to meet social needs
Consumers and firms obtain mutual benefits
One of the most common economic system implemented around the world
Capitalism
Individuals and sellers make economic decisions using a price system
Uses the idea of the invisible hand: self-interest + competition
An economic concept known as "Laiseez Faire"
No government interference except to protect property rights
Market Failure: occurrence when capitalism or socialism is implemented on their own
Productive Inefficiencies
Market waste scarce resources by overproducing products unneeded
Allocative Inefficiencies
Market fails to produce or does not produce enough what society need and want the most
Production Possibilities Curve (PPC)
Definition
Various possible combinations of goods and services produced within a specified time period with all resources fully and efficiently employed
Explains basic economic concept: scarcity, choices, and opportunity cost
Assumptions
Economy operates at full efficiency (full employment + full production)
Fixed amount of resources
State of technology does not change
Factors Influencing Shift
Improvements in technology
Economic growth
Increased = PPC bounds outwards (shift right)
Decrease = PPC bounds inwards (shift left)
Population
Shape
Convex
Decreased opportunity cost
Concave
Increased opportunity cost
Linear
Constant opportunity cost