Economics
- Created by: bethany
- Created on: 13-01-13 13:52
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- Economics
- Production Possibility Frontier
- Def: shows the maximum combination of two goods an economy can produce when using all of its resources efficiently.
- Opportunity cost: value of the next best alternative that is foregone
- Shifts in the PPF
- Outward shift:(economic growth) increase in quantity of resources, expansion of higher education and government training schemes, increase in investment or new technology
- Inward shift: (decrease in potential output of an economy) war, natural disaster where many resources are destroyed
- Specialisation and the Divison of Labour
- Specialisation: occurs when an individual, firm or region of a country concentrate on the production of a limited range of goods and services
- ADVANTAGES Increases in productivity and living standards
- DISADVANTAGES: If demand falls = significant increase in unemployment
- Division of labour: is one form of specialisation where individuals concentrate on the production of a particular good or service.
- ADVANTAGES: Person becomes highly skilled, No time wasted moving from one job to another, Capital equipment can be used continuously in production, Less time required to train workers, more choice of jobs for workers
- DISADVANTAGES: Repetition creates boredom, breaking down production makes it easier to replace skilled workers with machines, creates interdependence in production
- Specialisation: occurs when an individual, firm or region of a country concentrate on the production of a limited range of goods and services
- Free market economy: system where resources are privately owned and allocated through the price mechanism
- Mixed economy: system where resources are owned by both private individuals and the Government and some resources are allocated through the price mechanism and some the planning process
- POSITIVE ECONOMIC STATEMENT: Is an objective statement or fact, which can be proved or disproved, and concerns how the world is
- NORMATIVE ECONOMIC STATEMENT: Is a statement containing value of judgement, which cannot be proved or disproved and concerns how the world should be
- Production Possibility Frontier
- Def: shows the maximum combination of two goods an economy can produce when using all of its resources efficiently.
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