4 Factors of Production
Ø Factors
of Production: Resources
required to produce goods and services
o
Land
(Natural Resources)
o
Labor
(Work Force)
o
Capital
§ Physical
Capital: Tools, Buildings, Factories, Machines
§ Human
Capital: Skills, Abilities, Knowledge, Talents
o
Entrepreneuership
§ Being
innovative
§ Being
a risk taker
Trade-offs- Alternatives that we give up whenever we
choose one course of action over another
Opportunity
Cost- The next best
alternative
Production
Possibility Curve (PPC), Frontier (PPF), Graph (PPG)- To show alternative ways to use an
economy’s resources
4 Assumptions of a PPG
Ø Two
Goods
Ø Fixed
Resources (Land, Labor, Capital, Entrepreneurship)
Ø Fixed
Technology
Ø Full
Employment of Resources
Efficiency- Using resources in such a way as to
maximize the production of goods and services
Allocative
Efficiency- The
products being produced are the ones that are most desired by the society
Productive
Efficiency- Products
are being produced in the least costly way; Any point on the PPC
Underutilization- Using fewer resources than an economy is
capable of using
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