Economics 3.1 Market Equilibrium

The term that describes the condition of limited resources in relation to unlimited wants

Individuals must choose between alternatives due to limited means and scarce resources and therefore much choose the option they most desire

The next best thing forgone when a decision is made

Plentiful and have no cost such as wind and sunshine

Scarce and have a cost. can be either consumer goods or capital goods

Sold to people for their own private use such as cars and food

Man made goods such as tools and machinery that are used to make other goods and services

Means fewer consumer goods can be produced. the production of capital goods now will increase the countries future productive capacity. Vice versa for producing consumer goods now that will increase standards of living now but likely future output of economy will fall.

Shows the maximum output of two goods that can be produced given that existing resources and technology are used fully (to their best possible use with least cost)

There are two goods only, fixed resources and given level of technology

The maximum output on the curve shows scarcity as it is impossible to produce beyond the curve with existing resources and technology. in order for the ppf to shift outwards the firm or economy needs to find new resources or develop new technology

Inputs/resources used are more suited to the production of one good compared to the other. the opportunity cost increases as you move from one end of the curve to another. output per unit of one good will decrease as you move down along the curve.

Shows that resources used are equally efficient at producing either good (opportunity cost is constant/unchanged as you move form one end of the curve to the other)

Resources are fully utilised and are put to their best possible use. This is shown by any point on the ppf. best possible use means goods are produced at least cost

Any point within the ppf. Resources are not being fully utilised