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Macro 2
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Opportunity Cost
The value of the best alternative forgone when an item or activity is chosen
Absolute Advantage
The ability to make something using
fewer
resources than others produce
Comparative Advantage
The ability to make something at a lower opportunity cost than other produce.
Specialization
focusing work effort on a particular product or single task.
Division of Labor
Breaking down goods production into
separate
tasks.
Barter
the direct exchange of one good for another without using money.
PPF: (Production Possibilities Frontier)
-Inside PPF
: Inefficient
-Outside PPF
: Unattainable
PPF Curve is bowed out due to law of increasing opportunity cost.
Changes in
Resource
availability
-Size, health of labor force
-Skills of labor force
-Availability of other resources
Changes in
Capitol Stock
-More/less output
Changes in
Technology
-Employs resources more/less efficiently
Changes in the rules of the
game
-Formal and informal institutions
-Economic growth
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?
Pure
Capitalism
System
-Private property rights
-
Unrestricted
Markets
-Voluntary buying and selling
-Adam Smith "Invisible Hand"
Pure
Command
System
-Public/Communal property ownership
-Government planners direct resources/coordinate production
-
Communism
Mixed and Transitional Economy
-Increasing role of government in capitalist economies
-Increasing role of markets in command economies
Capitalism Flaws
-People with no resources would starve
-Monopoly
-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
Shifts
-Increases in demand shift demand curve to the
right
-Decreases shift to the
left
Law of Demand
Inverse relationship between quantity and price is why curve is downward sloping.
Author
Anonymous
ID
63521
Card Set
Macro 2
Description
Test 1
Updated
2011-02-02T02:16:56Z
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