PRODUCTION POSSIBILITY CURVE

Positive economic statements -------> facts

· E.g. in the UK, 1.4 m are employed

Normative economic statements: ----------> opinion

· E.g. unemployment in the UK is too high

Economics is the study of how individuals and societies choose between alternative uses of scarce resources to satisfy their wants

·        Individuals ---------> microeconomics

·        Societies --------> macroeconomics

·        Choose

·        Alternative uses -------> consumption or production

·        Scarce uses

·        Wants

Opportunity cost: the cost of any activity measured in terms of the best alternative forgone

The production possibility curve PPC: curve represents the limit to what the economy can produce with its given level of resources

If a country produces at point E then

The current standard of living is low

Future standard of living will grow

At point F then

High standard of living but

Future growth will be limited because there is little capital production