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The ability to produce the same good using fewer inputs than another producer.
ex. Gus had an absolute advantage in meth production over Walter White in season 2. |
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| Production Possibilities Frontier |
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| Shows all the combinations of goos that a country can produce given its productivity and supply of inputs. |
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The opportunity cost of an activity is what you forego in order to engage in that activity, compared to the best available alternative
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emphasised the role of the price system in simplifying the decision- making process
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for consumers: our budget, our tastes, the goods on offer and
crucially their prices
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father of modern economics, introduced the notion of the ‘invisible hand’
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Guided by this invisible hand, isolated individual decisions combine to create an efficient outcome at the level of society as a whole
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production possibilities frontier
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is a graph that shows the combi- nations of output that can possibly be produced given the available factors of production and the available production technology
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| A state where no one trades. |
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The theory of comparative advantage and trade is due to...
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Economist Paul Samuelson was once asked by mathematician Stanislaw Ulam what?
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To name a single proposition in social science which is both true and non-trivial, should have said comparative advantage
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the more an individual specialises in her activities, the more productive she becomes.
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A collection of buyers and sellers of a particular good or service
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The amount of a good that buyers are willing and able to purchase
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holds that, other things equal, the quantity de- manded of a good falls when the price of the good rises
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a table that shows the relationship between the price of the good and the quantity demanded
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a graph of the relationship between the price of a good and the quantity demanded
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diminishing marginal utility
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| you can only eat so many oysters before you dont want anymore. |
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refers to the sum of all individual demands for a par-
ticular good or service
Horizontal in graphs!
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| Cause shifts in demand curve... |
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Definition
- Consumer Incomes
- Consumer tastes
- Prices of substitutes or complements
- Number of buyers
- Expectations
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| A rise in income raises the demand |
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| A rise in income lowers demand |
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| Demand falls when the price of this rises |
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| Demand rises when the price of this rises |
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the amount of a good that sellers are willing and able to purchase
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holds that, other things equal, the quantity supplied of a good rises when the price of the good rises
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a table that shows the relationship between the price of the good and the quantity supplied
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a graph of the relationship between the price of a good and the quantity supplied
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increasing marginal costs
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associated with oyster production – it’s easier to get your hands on the first one than the fifth (e.g. must swim deeper). . .
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Refers to the sum of all individual supplies for a particular
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refers to a situation in which the price has reached the level
where quantity supplied equals quantity demanded
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Are valuable skills becoming more rare, and thus becoming better re-
warded? Or is it something to do with the demand for these skills?
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A buyer’s willingness to pay for a good minus the amount the buyer actually pays for it
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the excess of the price of a good over what a seller
would have been willing to sell it for (his cost of production)
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| Stop producing a good when... |
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Definition
when the marginal benefit of one more unit of
the good falls to equal the marginal cost of that good
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a measure of the responsiveness of supply and demand to
changes in the price
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resulting from a tax is equal to the falls in consumer and producer surplus, minus the government revenue that results
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