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OPPORTUNITY COST, ECONOMIC METHODOLOGY, FACTORS OF PRODUCTION,…
OPPORTUNITY COST
Opportunity Cost
What you give up when you choose one thing over another
Wants and needs
Wants
Goods and services that are luxury (unlimited)
Needs
Goods and services that are necessary for survival (limited)
Scarcity
When wants and needs are greater that available
Factors of production
Essential resources used to produce goods
Capital
Labour
Land
Enterprise
Choice
When resources are scarce so alternatives have to be considered
Firm
Any business that hires factors of production
ECONOMIC METHODOLOGY
Micro
The study of individual markets
Macro
The study of the whole economy
Statements
Positive
Refers to what will happen based on evidence
Normative
Refers to what will happen based on an economist opinion that cannot be proven
Time Periods
Short Run
Some inputs can change
Long Run
All factors of production can change
Very Looong Run
Everything is variable
FACTORS OF PRODUCTION
Land
Natural resource
Enterprise
Involves organising production and taking risks
Labour
Human resource
Capital
A physical resource made by humans that aids the production of goods and services
classification of goods and services
types of goods of groups & services
provate goods
public good
free goods
private goods
have a price due to limited supply and demand
consumed by individuals or firms for personal benefit
free goods
no price; freely in nature
no production resources required
have zero opportunity cost - not limited by scarcity
public goods
Resource allocation in different economic systemes
what are economic systems
low income countyes
middle income counties
scarsity
high income countries
market economy
Uses of the law of supply and demand
productin pssivility curves
how the ppc works
the ppc illustrates the maximun ouput of two goods
types of ppc
constant opportunity cost
incrising opportunity cost
key illustrated
opportunity cost
producing more of one good means producing less of the other
underutilization
points inside the curve = wasted or unemployment
efficiency
points on the curve = full use of resources
economic growth
if the ppc shifts outward, it shows an increase in resource quantity or technology