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Economics-ECF1100 - Coggle Diagram

- - - - Maintaining a positive framework is crucial for economic analysis because it allows decision makers to observe the facts objectively.
  - - - Trade-offs--whenever society is producing on the production possibilities frontier, the only way to get more of one good is to accept less of another.Because an economy operating at a point on the frontier will be efficient. , every point on the frontier represents full-capacity output.
      - Opportunity cost-Because our two-good society produces only pizza and wings, the trade-offs that occur along the production possibilities frontier represent the opportunity cost of producing one good instead of the other.
      - The PPF and economic growth is the process that enables a society to produce more output in the future.
        
        The PPF will also expand if the population grows.
      - The Law of Increasing Opportunity cost holds that as an economy moves along its production possibilities curve in the direction of producing more of a particular good, the opportunity cost of additional units of that good will increase.
      - Shift upward and outward or Inward and dowanward
        
        Upward and Outwnward
        
        Economic growth( technology)
        
        More resources (Labor/ Capital goods）
        
        Each person consumes more with trade,can shift outwardly of PPF
        
        Inward and Downward
        
        Economy might fail to use fully the resources available to it.
        
        It might not allocate resources on the basis of comparative advantage.
  - - - Each individuals will specialize in what he or she is better at producing and then will trade to acquire some of good produced by the other person.
      - Absolute advantage: refers to one producer's ability to make more than another producer with the same quality of resources.
      - Specialization is the limiting of one's work to a particular area.
        
        specialization leads to greater output.
      - Comparative advantage---- is the ability to make a good at a lower opportunity cost than another producer.
  - - - Consumer good- any good that is produced for present consumption is a consumer goods. These goods help to satisfy our needs or wants now.Food, entertainment, and clothing are all examples of consumer goods.
      - Capital goods help in the production of other value goods and services in the future. Capital goods are everywhere. Roads, factories, trucks and computers are all capital goods.
      - Investment is the process of using resources to create or buy new capital.
- - - - So when economists talk about opportunity cost, they are assessing whether the alternatives are better than what you are currently doing, which considers a larger set of possible outcomes.
    - - Positive incentive- encourage action by offering rewards or payments.
      - Negative incentive-discourage action by providing undesirable consequences or punishments.
      - Indirect incentive
      - Direct incentive
    - - By fostering the exchange of goods, trade helps to create additional growth through specialization. Comparative advantages harnesses the power of specialization and refers to the situation in which an individual, business, or country can produce at a lower opportunity cost than a competitor can.