Increasing opportunity cost
Opportunity cost can be thought of in terms of how decisions to increase the production of an extra, marginal, unit of one good leads to a decrease in the production…
Pareto efficiency
Any point on a PPF, such as points 'A' and 'B', is said to be efficient and indicates that an economy’s scarce resources are being fully employed. This is also…
Interpreting PPFs
Firstly, we can describe the opportunity cost to Mythica of producing a given output of computers or textbooks. For example, If Mythica produces 3m computers; the opportunity cost is 5m textbooks. This is the…
Production possibility frontiers
An opportunity cost will usually arise whenever an economic agent chooses between alternative ways of allocating scarce resources. The opportunity cost of such a decision is the value of the…
Samuelson’s three questions
America’s first Nobel Prize winner for economics, the late Paul Samuelson, is often credited with providing the first clear and simple explanation of the economic problem - namely, that in order…
Choice and opportunity cost
Choice and opportunity cost are two fundamental concepts in economics. Given that resources are limited, producers and consumers have to make choices between competing alternatives. All economic decisions involve making choices. Individuals must…
The economic problem
All societies face the economic problem, which is the problem of how to make the best use of limited, or scarce, resources. The economic problem exists because, although the needs and…
The role of money in exchange
Money occupies a central role in market economies because it acts as a medium of exchange. The advent of money replaced the need for exchange through barter and enabled producers…
Types of production
Production is undertaken by firms, also known as enterprises, or businesses. There are three stages of production: 1. Primary production, which involves the extraction of resources from the earth, such as agriculture, fishing, and…
Factors of production
Production involves the creation of goods and services by using scarce resources. Producers must exchange the income they earn for the scarce resources they need to enable them to produce.…
