The Basic Econmic Problem

Scarcity
1. Economic decisions must be made to allocate resources efficently
PPT
1. Conclave PPF-shows two or more goods that can be produced while using resources efficently
2. Straight Line PPF-shows the constant opportunity cost between two goods usually homogenous and substitue goods
3. Outward shifts in PPF's are caused by, Economic Growth, Improvements in labour or Increse in resources
4. Inward shifts in PPF's are caused by, Economic Recession, Natural disasters or a Delay in Labour
Opportunity Cost
1. The next best alternative forgone when making a choice
Specialisation
1. When we concentrate on a product or task enabling us to be more skilled and produce a larger output
2. Some large companies specialise in many sectors. They move away from specialisation
3. Absoulte Advantage-Absolute advantage means that an economy can produce a good for lower costs than another. It means that less resources are needed to produce the same amount of goods.
Division of Labour
1. Rasises the output per person as people become pro-effiecent
2. Benefits of D.O.L- More skills, Promotions, Less movement, Higher quality, Increased profit
3. Negatives of D.O.L- Less interest, No incentive to work, Decreased output or Less profit
Productivity
1. The output per person per period of time. With the use of specialistion, the worker would produce more

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