Choice, Specialisation, Exchange and Production Possibility Curves

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  • Created by: lizaloo98
  • Created on: 05-04-16 23:06
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  • Choice, Specialisation, Exchange and Production Possibility Curves
    • Exchange
      • The process by which goods and services are traded
    • Production Possibility Curves
      • Opportunity Cost
        • The cost of the next best alternative foregone when a decision is made
      • The  PPF (Production Possibility Frontier) shows what's possible using a particular level of resources
        • For example: a particular number of people, a particular amount of capital and raw materials....
        • If the total amount of resources changes OR there are improvements or deterioration's in the factors of production (so they can increase output), the PPF curve itself moves/shifts.
          • If it shifts outward this is a sign of economic growth. As productive capacity has increased.
          • If there is a natural disaster the PPF curve will shift inwards, as the total possible output has shrunk. (Negative Economic Growth)
      • Trade-off
        • When you have to choose between conflicting objectives because you cant achieve all your objectives at the same time.
          • Involves compromising and aiming to achieve each of your objectives a bit.
        • The calculation involved in deciding on whether to give up one good for another
      • shows the maximum quantities of different combinations of output of two products, given current resources and the state of technology
    • Specialisation
      • The concentration by a worker or workers, firm, region or whole economy on a narrow range of goods and services.
    • Division of Labour
      • The specialisation of labour where the production process is broken down into specific tasks
    • Allocation of scarce resources means that with unlimited wants, the decision of allocating finite resources.

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