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What are the differences between absolute and comparative advantage?
Absolute advantage is about producing more with the same resources; comparative advantage is about producing at a lower opportunity cost.
What are the differences between explicit and implicit costs?
Explicit costs involve direct payments; implicit costs are opportunity costs of using resources.
What are the differences between productive and allocative efficiency?
Productive efficiency is producing at the lowest cost; allocative efficiency is producing the optimal mix of goods.
What are the differences between a free market and a command economy?
Free market relies on individual decisions; command economy relies on government control.
What is the difference between physical and human capital?
Physical capital refers to machinery and tools; human capital refers to skills and knowledge.
Differentiate between scarcity and shortage.
Scarcity is a fundamental condition of limited resources, while a shortage is a temporary lack of a good at a specific price.
What is the difference between microeconomics and macroeconomics?
Microeconomics studies individual decisions, while macroeconomics studies the economy as a whole.
What is the difference between normative and positive economics?
Positive economics is based on facts and cause-and-effect relationships, while normative economics incorporates subjective value judgments.
Differentiate between economic efficiency and equity.
Economic efficiency focuses on maximizing output from resources, while equity concerns the fair distribution of resources and outcomes.
What is the difference between a good and a service?
A good is a tangible item that satisfies a want, while a service is an intangible act that satisfies a want.
What does a point on the PPC represent?
Efficient use of all resources in producing the two goods.
What does a point inside the PPC represent?
Inefficient use of resources or unemployment.
What does a point outside the PPC represent?
An unattainable level of production with current resources and technology.
What does a shift outward of the PPC represent?
Economic growth due to increased resources or improved technology.
What does a movement along the PPC represent?
A trade-off between the production of two goods; increasing production of one requires decreasing production of the other.
How does the shape of the PPC relate to opportunity cost?
A linear PPC indicates constant opportunity costs, while a bowed-out PPC indicates increasing opportunity costs.
Explain how technological advancements affect the PPC.
Technological advancements in one industry shift the PPC outward along the axis of that good, allowing more production.
How do changes in resource availability impact the PPC?
Increased resource availability shifts the PPC outward, enabling a higher potential output for both goods.
Describe the implications of operating at a point inside the PPC.
Operating inside the PPC signifies underutilization of resources, leading to lower overall production than possible.
How does trade affect a country's consumption possibilities relative to its PPC?
Trade allows a country to consume beyond its PPC by specializing in goods with a comparative advantage and exchanging them with other nations.
What is scarcity?
Unlimited wants but limited resources.
Define opportunity cost.
The value of the next best alternative foregone.
What is a Production Possibilities Curve (PPC)?
A graph showing maximum combinations of goods/services an economy can produce.
What is comparative advantage?
Ability to produce a good at a lower opportunity cost than competitors.
Define Demand.
The quantity of a good consumers are willing to buy.
What is Supply?
The quantity of a good producers are willing to offer.
Define Equilibrium.
The point where quantity supplied equals quantity demanded.
What is economics?
The study of how we allocate limited resources to satisfy unlimited wants and needs.
What is laissez-faire?
A system where markets allocate resources perfectly without intervention.
What are markets?
Places (physical or virtual) where buyers and sellers interact to exchange goods or services.