Card Set Information
The value of the best alternative forgone when an item or activity is chosen
The ability to make something using
resources than others produce
The ability to make something at a lower opportunity cost than other produce.
focusing work effort on a particular product or single task.
Division of Labor
Breaking down goods production into
the direct exchange of one good for another without using money.
PPF: (Production Possibilities Frontier)
PPF Curve is bowed out due to law of increasing opportunity cost.
-Size, health of labor force
-Skills of labor force
-Availability of other resources
-Employs resources more/less efficiently
Changes in the rules of the
-Formal and informal institutions
3 Big Questions
1. What are we going to make?
2. How are we going to make it?
3. Who are we going to make it for?
-Private property rights
-Voluntary buying and selling
-Adam Smith "Invisible Hand"
-Public/Communal property ownership
-Government planners direct resources/coordinate production
Mixed and Transitional Economy
-Increasing role of government in capitalist economies
-Increasing role of markets in command economies
-People with no resources would starve
-Side effects for those not involved
-No public goods
Command System Flaws
-Resources used inefficiently/wasted (no incentives)
-Preferences of planners limits variety of products
-Less freedom of economic choice
-Increases in demand shift demand curve to the
-Decreases shift to the
Law of Demand
Inverse relationship between quantity and price is why curve is downward sloping.