Scarcity
- the limited nature of society's resources causes an inability to satisfy all our wants
- The fundamental economic problem that all societies face
- Permanent
Choice
Incentives - a reward that encourages or a penalty that discourages an action
- If we want more of one thing, we must trade something else in exchange for it
Opportunity Cost
- the highest-valued alternative that we give up to get something
Law of increasing opportunity cost – as you produce more of one good, the opportunity cost
(the foregone production of another good) will increase
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| Constant PPG (same) |
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| Concave (bowed out) |
Productive efficiency vs Allocative Efficiency
Productive efficiency – this
is where products are being produced in the least costly way
- Producing like we should,
on the curve
Allocative Efficiency – the
products that are being produced are the ones that are desired by the economy
This post is well formatted and easy to understand. If I may make one comment though, I think that opportunity cost, productive and allocative efficiency would better fit in with the post with the productions possibility graphs, rather than this one. I also think that scarcity and choice can be put into the basics of economics post.
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