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WorksheetsEconomics Unit 3 AOS1 Part 1
Total questions: 114
Worksheet time: 8hrs 27mins
The level of output per unit of labour
Technical/ productive efficiency
Labour contraction
Labour retention
Labour productivity
Example: Education
Students gain private benefits from education,
such as higher income, better job opportunities, and improved skills.
Students mainly consider these private benefits when deciding whether to study.
Education also creates external benefits for society,
such as higher productivity, lower crime rates, and better economic growth.
However, students do not consider these external benefits when making their decision.
As a result, education is under-consumed.
This leads to lower demand for education services.
Education providers respond by offering fewer courses.
This causes fewer teachers to be hired, resulting in an under-allocation of labour. This is called Positive externality.
Therefore, there is an under-allocation of resources because the producer or consumer does not consider the external benefit.
This situation is known as a __________.
Positive externality
Negative externality
Dynamic efficiency
Adverse selection
Example: Research and Development (R&D)
Firms gain private benefits from investing in research and development (R&D), such as higher profits and competitive advantage.
Firms mainly consider these private benefits when deciding how much to invest in R&D.
R&D also creates external benefits for society, such as new knowledge, technological spillovers, and long-term economic growth.
However, firms do not fully consider these external benefits because other firms and society can benefit for free.
As a result, R&D is under-invested in.
This leads to lower demand for researchers, laboratories, and innovation facilities.
Firms hire fewer scientists and engineers, resulting in an under-allocation of resources, especially labour and capital, to R&D.
Therefore, there is an under-allocation of resources because the producer does not consider the external benefit.
This situation is known as a ?
Positive externality
Negative externality
Dynamic efficiency
Adverse selection
Price elasticity of supply (PES) measures how responsive quantity supplied is to a change in price.
Low price elasticity of supply means supply is inelastic
Inelastic supply = producers cannot easily change output
So even when price changes, quantity supplied changes only a little
Example: Think about agriculture in the short run:If the price of wheat rises today
Farmers cannot instantly grow more crops
Land, time, and weather limit supply
So:
Price increase a lot
Quantity supplied ↑ only a little
➡️ Low PES
Low price elasticity of supply means that:
A change in price will lead to an inverse change in quantity supplied.
A change in price will lead to a large change in quantity supplied.
A change in price will lead to a relatively small change in quantity supplied.
A change in price will lead to no change in quantity supplied.
Where Demand > Supply causing upward pressure on price
Equilibrium
Shortage
Surplus
Capital
Technological change
A demand-side factor
A supply-side factor
% change in quantity supplied / % change in PC
% change in quantity demand / % change in Pc
Non-price factors likely to affect supply and the position of the supply curve, including changes in the
Costs of production,
Number of suppliers,
Technology,
Productivity and
Climatic conditions
Technological change is ？？
A demand-side factor
A supply-side factor
% change in quantity supplied / % change in PC
% change in quantity demand / % change in Pc
Factors that impact PES include:
Technological advancements, weather conditions and trade agreements
Income levels, interest rates and government policies
Production period, spare capacity and durability of goods
Consumer preferences, market trends and advertising
Price elasticity of supply (PES) measures how easily producers can change output when price changes.
The correct factors are all about how quickly and easily production can change.
1️⃣ Production period
This is the time needed to produce more output.
Short production period → hard to increase supply → low PES
Long production period → easier to increase supply → high PES
Example:
Agricultural goods → long time to grow → low PES (short run)
2️⃣ Spare capacityThis is whether firms have unused resources.
High spare capacity → firms can increase output quickly → high PES
No spare capacity → output can’t rise much → low PES
Example:
Factories with idle machines can respond fast to price rises
3️⃣ Durability of goodsThis is whether goods can be stored.
Durable goods → can be stockpiled and released → high PES
Perishable goods → cannot be stored → low PES
Example:
Cars (durable) vs fresh milk (perishable)
Factors that impact PES include ？？？
Technological advancements, weather conditions and trade agreements
Income levels, interest rates and government policies
Production period, spare capacity and durability of goods
Consumer preferences, market trends and advertising
Will cause an over-allocation of resources because the producer or consumer will not consider the social cost
Positive externality
Negative externality
Dynamic efficiency
Moral Hazard
Example: Pollution from Factories
Firms gain private benefits from producing goods, such as higher profits and lower production costs.
Firms mainly consider these private benefits when deciding how much to produce.
Production also creates external costs for society, such as air pollution, health problems, and environmental damage.
However, firms do not consider these external costs when making their production decisions.
As a result, too much output is produced.
This leads to excessive production activity.
Firms continue producing at high levels because production appears cheap to them.
This results in too much labour, capital, and land being used in polluting industries, causing an over-allocation of resources.
So, this will cause an over-allocation of resources because the producer or consumer does not consider the social cost.
This situation is known as a negative externality.
Therefore, _____________ will cause an over-allocation of resources because the producer or consumer will not consider the social cost.
Positive externality
Negative externality
Dynamic efficiency
Moral Hazard
Price elasticity of demand (PED) measures how responsive quantity demanded is to a change in price.
So the key question is:
👉 How easily can consumers change what they buy when price changes?
1️⃣ Degree of necessity
Necessities (e.g. food, medicine) → demand is inelastic
Luxuries (e.g. holidays, designer clothes) → demand is elastic
Why: people still buy necessities even when prices rise.
2️⃣ Availability of substitutes
Many substitutes → demand is elastic
Few or no substitutes → demand is inelastic
Why: if the price rises, consumers can switch to alternatives.
3️⃣ Proportion of income
High proportion of income → demand is elastic
Low proportion of income → demand is inelastic
Why: consumers react more when a price change hurts their budget.
4️⃣ Time
Short run → demand is more inelastic
Long run → demand becomes more ela?stic
Why: consumers need time to adjust behaviour and find substitutes.
Factors that impact PED include?
Market competition, labor wages, raw material availability
Government regulations, tax rates, interest rates
Production costs, supply chain efficiency, technological innovation
Degree of necessity, availability of substitutes, portion of income and time
Non-price factors likely to affect demand and the position of the demand curve, including
1. Changes in disposable income,
2. The prices of substitutes and
3. Complements,
3. Preferences and tastes,
4. Interest rates,
5. Population demographics and
6. Consumer confidence
Population growth is .....
A supply-side factor
% change in Qd / % change in Pc
% change in Qs / % change in PC
A demand-side factor
Means that suppliers must compete on price
There are too many firms
There are too few firms
Price is greater than marginal cost
Products are homogenous
Homogeneous products are identical in the eyes of consumers.
No difference in quality
No difference in features
No difference in branding
Because products are the same, consumers will:
👉 choose the cheapest option
Why suppliers must compete on price, because______
There are too many firms
There are too few firms
Price is greater than marginal cost
Products are homogenous
Where the government provides the good or service to society
Indirect taxation
Regulation
Compliments
Direct government provision
The question says:
“Where the government provides the good or service to society.”
Direct government provision means:
The government itself produces or supplies the good or service
It is not relying on prices, taxes, or rules
Examples:
Public education, Public hospitals, Public transport, Police and defence
So the wording matches direct government provision exactly.
Indirect taxation ❌
This means the government changes prices by adding a tax (e.g. GST, tobacco tax).
The government is not providing the good, only influencing consumption.
Direct government provision occurs when the government directly supplies goods and services to society, such as healthcare and education.
Question: Where the government provides the good or service to society, it is called__________.
Indirect taxation
Regulation
Compliments
Direct government provision
Price elasticity of demand (PED) measures how responsive quantity demanded is when the price of a good changes. It is given by the formula:
The numerator (% change in Qd) shows how much buyers change the amount they buy when price changes.
The denominator (% change in P) shows how big the price change is in percentage terms.�
Change in Price Elasticity of Demand (PED) measured by: (elastic mean sensitive to price changes).
% change in Qd / % change in Income
% change in Qd / % change in Pc
% change in Qd / % change in Qs
% change in Qs / % change in PC
Preferences, tastes and attitudes
A supply-side factor
A demand-side factor
Where Demand > Supply causing upward pressure on price
Degree of necessity, availability of substitutes, portion of income and time
Price elasticity of supply (PES) measures how responsive quantity supplied is to a change in price.
Low price elasticity of supply means supply is inelastic
Inelastic supply = producers cannot easily change output
So even when price changes, quantity supplied changes only a little
That’s why:
👉 Price change → small change in quantity supply
Once you see “low elasticity”, your brain should auto-translate it to:
👉 “Not very responsive.”
Low price elasticity of supply means that:
A change in price will lead to an inverse change in quantity supply
A change in price will lead to a relatively small change in quantity supply
A change in price will lead to a large change in quantity supply
A change in price will lead to no change in quantity supply
1) Indirect taxation: This means the government changes prices by adding a tax (e.g. GST, tobacco tax).
2) Progressive taxation:
This means the tax rate increases as income increases, so higher-income earners pay a higher percentage of their income in tax (e.g. income tax with tax brackets).
3) Proportional taxation:
This means everyone pays the same percentage of their income in tax, regardless of income level (e.g. a flat income tax rate such as 20% for all earners).
4) Specific tax:
This means a fixed amount of tax is charged per unit of a good or service, regardless of its price. (e.g. $1 per litre of petrol or $2 per packet of cigarettes).
A source of government revenue, applied to the production of goods and services causing the final price of good/ service to increase, this is ???
Indirect taxation
Progressive taxation
Proportional taxation
Specific tax
Price elasticity of supply (PES) measures how responsive quantity supplied is to a change in price.
Low price elasticity of supply means supply is inelastic
Inelastic supply = producers cannot easily change output
So even when price changes, quantity supplied changes only a little
That’s why:
👉 Price change → small change in quantity supply
The responsive of quantity supplied to a change in price is ______
Income elasticity of supply (IES)
Price elasticity of supply (PES)
Cross elasticity of supply (CES)
Elasticity of production (EPS)
Financial assistance provided by the government to a producer - is offered to ensure the production of certain goods and services
Government subsidy
Community service
Production
Government taxes
The economic problem of having unlimited needs and wants with only limited means to satisfy them
Relative price
Surplus
Relative scarcity
Discretionary income
The value of the next best alternative forgone whenever a choice is made
Total cost
Sunk cost
Opportunity cost
Resources are allocated such that society's welbeing is best satisfied
Technical/ productive efficiency
Scarcity
Allocative efficiency
Consumer confidence
Factors that impact PES include:
Technological advancements, weather conditions and trade agreements
Income levels, interest rates and government policies
Production period, spare capacity and durability of goods
Consumer preferences, market trends and advertising
Where one party to a transaction knows more about the product than the other party (Seller knows more than buyer or Buyer knows more than seller)
Verifiable information
Fraud
Incomplete contract
Asymmetric information
High price elasticity of supply means that:
A change in price will lead to relatively large change in Qs
A change in price will lead to a decrease in Qs
A change in price will lead to a relatively small change in Qs
A change in price will lead to no change in Qs
Good or service that is consumed with another good or service
Substitutes
Compliments
Normal Good
Inferior Good
Technological change
A demand-side factor
A supply-side factor
% change in Qd / % change in Pc
% change in Qs / % change in PC
As the price increases, the quantity supplied increases
The law of supply
The law of demand
The law of diminishing returns
The law of diminishing marginal utility
Means that suppliers must compete on price
There are too few firms
Price is greater than marginal cost
Products are homogenous
There are too many firms
What to produce? How to produce? Who to produce for?
Four economic resources
Many buyers and sellers
The three economic questions
Preferences, tastes and attitudes
Preferences, tastes and attitudes
A demand-side factor
Where Demand > Supply causing upward pressure on price
Degree of necessity, availability of substitutes, portion of income and time
A supply-side factor
The economic problem of having unlimited needs and wants with only limited means to satisfy them
Discretionary income
Relative scarcity
Relative price
Surplus
The value of the next best alternative forgone whenever a choice is made
Sunk cost
Total cost
Opportunity cost
Fixed cost
What are the conditions of a perfectly competitive market?
Few buyers and sellers
Many buyers and sellers
No barriers to new firms entering the market
High barriers to entry
All firms selling identical products
As prices increase, the quantity demanded decreases
The law of one price
The law of demand
The law of diminishing returns
The law of supply
Movement up the demand curve
Contraction along supply curve
Contraction along demand curve
Expansion along supply curve
Expansion along demand curve
Movement down demand curve
Contraction along supply curve
Expansion along demand curve
Contraction along demand curve
Expansion along supply curve
Movement down supply curve
Expansion along demand curve
Contraction along demand curve
Contraction along supply curve
Expansion along supply curve
As prices increase, the quantity demanded decreases
The law of supply
The law of demand
The law of one price
The law of diminishing returns
Movement up supply curve
Movement up supply curve
Movement down supply curve
Household income comes from:
Wages, rent, interest, profit (reward for contributing to production)
Plus government transfers (e.g. Centrelink payments)
Minus income tax
What’s left is the money households can actually spend or save.
👉 That final amount = Disposable income
Disposable income = Gross income + transfers − income tax
Definition: The reward received by household for contribution to production process plus government transfers less income tax
Gross income
Compliments
Disposable income
Gross pay
The economic problem of having unlimited needs and wants with only limited means to satisfy them
(a)
The value of the next best alternative forgone whenever a choice is made
(a)
As prices increase, the quantity demanded decreases
(a)
Movement up the demand curve
(a)
Movement down demand curve
(a)
Movement down supply curve
(a)
Movement up supply curve
(a)
Disposable income
The reward received by household for contribution to production process plus government transfers less income tax
Disposable income available for spending and saving after an individual has paid for non-avoidable expenditures
Disposable income = income after tax and transfers
Non-avoidable expenses = rent, food, utilities, transport
What’s left after paying these essentials is:
This is the money used for:
Entertainment, Eating out, Holidays, Luxury goods
Disposable income → after taxDiscretionary income → after necessities
Discretionary income
The reward received by household for contribution to production process plus government transfers less income tax
Disposable income available for spending and saving after an individual has paid for non-avoidable expenditures
How can a you increase the PPF
By increasing productivity (output per input) or finding new resources
Impossible to achieve
encourage firms not to waste resources and use them to best satisfy consumers needs and wants.
A balance in information between buyers and sellers.
A point outside the PPF is
By increasing productivity (output per input) or finding new resources
Impossible to achieve
encourage firms not to waste resources and use them to best satisfy consumers needs and wants.
A balance in information between buyers and sellers.
In a perfectly competitive market:
There are many firms
Products are homogeneous
Firms are price takers
Firms face strong competition
Because of this:
🔹 1. Firms must minimise costs
If a firm wastes resources or produces inefficiently, it will have higher costs than rivals and be forced out of the market.
👉 This leads to productive efficiency (no waste).
🔹 2. Firms must produce what consumers want
If a firm produces goods consumers do not want, it cannot sell them.
👉 Resources move toward producing goods and services that best satisfy consumer needs and wants.
This leads to allocative efficiency.
How do perfectly competitive markets increase efficiency?
By increasing productivity (output per input) or finding new resources
Impossible to achieve
encourage firms not to waste resources and use them to best satisfy consumers needs and wants.
A balance in information between buyers and sellers.
Symmetric Information
By increasing productivity (output per input) or finding new resources
Impossible to achieve
encourage firms not to waste resources and use them to best satisfy consumers needs and wants.
A balance in information between buyers and sellers.
Intertemporal efficiency
The ability of an economy to shifting resources to different production via innovation and technology
balancing the use of resources for today use with the future.
the same as Technical efficiency
Collective wellbeing is maximised. Overall people get what they want
Allocative efficiency
The ability of an economy to shifting resources to different production via innovation and technology
balancing the use of resources for today use with the future.
the same as Technical efficiency
Collective wellbeing is maximised. Overall people get what they want
Dynamic efficiency
The ability of an economy to shifting resources to different production via innovation and technology
balancing the use of resources for today use with the future.
the same as Technical efficiency
Collective wellbeing is maximised. Overall people get what they want
Productive efficiency =
The ability of an economy to shifting resources to different production via innovation and technology
balancing the use of resources for today use with the future.
the same as Technical efficiency
Collective wellbeing is maximised. Overall people get what they want
Product Markets
where resources, especially capital and labor, are bought and sold
anywhere on the PPF
where goods and services are bought and sold
Identical products
Homogeneous goods and services
where resources, especially capital and labor, are bought and sold
anywhere on the PPF
where goods and services are bought and sold
Identical products
Productive efficiency is .............. on the PPF
where resources, especially capital and labor, are bought and sold
anywhere on the PPF
where goods and services are bought and sold
Identical products
Factor Markets
where resources, especially capital and labor, are bought and sold
anywhere on the PPF
where goods and services are bought and sold
Identical products
Production Possibilities Frontier (PPF)
It is the problem that all economies face, where limited resources are unable to meet unlimited needs and wants.
It shows the maximum possible combinations of two goods or services that can be produced using limited resources and current technology.
It occurs when resources are allocated in a way that maximises consumers' needs and wants, resulting in the highest possible living standards.
It is an allocation of resources in which resources in the short-run are preserved for future consumption
What and how much to produce?
Because of ________, resources are _______, so an economy cannot produce everything it wants.
As a result, choices must be made and there is an ___________ ____, as producing more of one good or service means producing less of another.
(a)
What and how much to produce?
Who answers it?
It is answered by _________, __________ and ___________
(a)
What and how much to produce?
Who answers it?
Consumers influence this decision through ______, businesses aim to maximise ______, and governments provide public _____ and ________.
(a)
Opportunity cost
Opportunity cost is the value of the alternative that must be forgone when making a decision.
Opportunity cost is the value of the next alternative that must be forgone when making a decision.
Opportunity cost is the value of the next best alternative that must be forgone when making a decision.
Opportunity cost is the value of the best that must be forgone when making a decision.
Outline what is involved in the study of economics.
Economics is the study of choices made by people in order to make people better off in terms of their living standards.
Economics is the study of choices made by market in order to make people better off in terms of their living standards.
Economics is the study of choices made by people, businesses and government in order to make people better off in terms of their living standards.
Economics is the study of choices made by government in order to make country better off in terms of their living standards.
Microeconomics
Combining all markets and industries and the overall state of the country’s economy. It therefore concentrates on areas like national spending, output, income, employment, the inflation rate and overall material living standards.
Involves looking at the operation of the smaller parts that make up the wider Australian economy. It therefore focuses on a single firm, industry, sector or a particular market.
Macroeconomics
Combining all markets and industries and the overall state of the country’s economy. It therefore concentrates on areas like national spending, output, income, employment, the inflation rate and overall material living standards.
Involves looking at the operation of the smaller parts that make up the wider Australian economy. It therefore focuses on a single firm, industry, sector or a particular market.
Select each of the issues as primarily areas of microeconomic studies.
The reasons for Australia’s lower inflation rate
the effects of a reduction in personal income tax rates
the pricing of petrol by oil companies
the causes of lower output and the decline of employment in the sugar industry
the impact of rising debt levels on farmers in the Riverina area
Select each of the issues as primarily areas of macroeconomic studies.
The reasons for Australia’s lower inflation rate
the effects of a reduction in personal income tax rates
the pricing of petrol by oil companies
the causes of lower output and the decline of employment in the sugar industry
the effects of a slowdown in a country’s rate of economic growth
Needs are
goods and services necessary for survival
goods and services that make life more enjoyable but are not essential to our survival.
Wants are
goods and services necessary for survival
goods and services that make life more enjoyable but are not essential to our survival.
Which one is a never-ending list of personal desires.
Needs
Wants
Define natural resources
the gifts that government provides
the gifts that human provides
the gifts that nature provides
Distinguish capital resources from natural resources.
Capital resources are the cost used in the production, while natural resources are those resources that occur in nature. Natural resources include arable land, oceans, minerals and native forests.
Capital resources are human-made goods used in the production process, while natural resources are those resources that occur in nature. Natural resources include arable land, oceans, minerals and native forests.
Natural resources — the gifts that nature provides; for example, arable land, rivers, forests, oceans.
Labour resources skilled and unskilled resources that provide physical power, mental talents and other specialised services used in the production process. Labour often refers to the workers within a business. Examples can include a mechanic, architect or shop attendant. Specialised labour can include entrepreneurship, representing management skills or business leadership.
Capital resources — the manufactured items often involving physical parts and equipment, such as machinery, factories, computer systems, trucks and, on a broader scale, infrastructure such as power generation, roads and railways.
Yes
No
Explain why it is necessary for society to make economic choices or decisions about production and resource allocation or use.
Society must make choices concerning how to use their maximum resources as efficiently as possible because relative scarcity means that we cannot have all the goods and services that we want.
Society must make choices concerning how to use their limited resources as efficiently as possible because relative scarcity means that we cannot have all the goods and services that we want.
Society does not need to make economic choices because resources are abundant and can meet all needs and wants.
Only governments need to make economic decisions, as households and firms are not affected by scarcity.
Define what is meant by opportunity cost and explain why it exists.
Opportunity cost is the value of the next best alternative forgone when resources are used for one purpose instead of another.
Opportunity cost exists because resources are limited.
Because of relative scarcity, we cannot use resources for all possible options at the same time.
As a result, choices must be made, and choosing one option means giving up the next best alternative.
Opportunity cost only exists when money is spent on a decision.
Outline the general factors that affect the overall size of a nation’s production possibility frontier.
foreign investment
skilled immigration,
exploration of natural resources
new technology
improved worker productivity or efficiency & improved labour force skills
Allocative efficiency
refers to when resources are allocated so that maximum output is achieved with lowest cost production methods in making goods and services.
occurs when resources are reallocated quickly in response to the changing needs and tastes of consumers.
occurs when all resources are allocated such that society's wellbeing is best satisfied.
refers to finding the optimal balance between current consumption or an allocation of resources in which resources in the short-run are preserved for future consumption
Productive efficiency
refers to when resources are allocated so that maximum output is achieved with lowest cost production methods in making goods and services.
occurs when resources are reallocated quickly in response to the changing needs and tastes of consumers.
occurs when all resources are allocated such that society's wellbeing is best satisfied.
refers to finding the optimal balance between current consumption or an allocation of resources in which resources in the short-run are preserved for future consumption
Dynamic efficiency
refers to when resources are allocated so that maximum output is achieved with lowest cost production methods in making goods and services.
occurs when resources are reallocated quickly in response to the changing needs and tastes of consumers.
occurs when all resources are allocated such that society's wellbeing is best satisfied.
refers to finding the optimal balance between current consumption or an allocation of resources in which resources in the short-run are preserved for future consumption
Inter-temporal efficiency
refers to when resources are allocated so that maximum output is achieved with lowest cost production methods in making goods and services.
occurs when resources are reallocated quickly in response to the changing needs and tastes of consumers.
occurs when all resources are allocated such that society's wellbeing is best satisfied.
refers to finding the optimal balance between current consumption or an allocation of resources in which resources in the short-run are preserved for future consumption
_____________is where these productive inputs are used to produce particular goods and services that maximise the satisfaction of society’s needs and wants. There would be no other use to which resources could be put that would further lift production, so living standards should also be maximised.
Inter-temporal efficiency
Dynamic efficiency
Productive efficiency
Allocative efficiency
Distinguish between the following pairs of terms:
allocative efficiency and productive (technical) efficiency
Allocative efficiency is when resources are used to produce those goods and services that best maximise the overall satisfaction of society’s needs and wants.
Productive, or technical, efficiency is the use of the lowest cost production methods and minimising wastage of resources in the provision of goods and services.
Allocative efficiency refers to finding the optimal balance between current consumption by spending income now, and the saving of some of that income to finance investment and potential future consumption.
Productive, or technical, efficiency refers to the speed at which resources can be reallocated as needed to meet changing needs and choices of consumers.
Distinguish between the following pairs of terms:
intertemporal efficiency and dynamic efficiency.
Intertemporal efficiency is when resources are used to produce those goods and services that best maximise the overall satisfaction of society’s needs and wants.
Dynamic efficiency is the use of the lowest cost production methods and minimising wastage of resources in the provision of goods and services.
Intertemporal efficiency refers to finding the optimal balance between current consumption by spending income now, and the saving of some of that income to finance investment and potential future consumption.
Dynamic efficiency refers to the speed at which resources can be reallocated as needed to meet changing needs and choices of consumers.
balancing the use of resources for today use with the future.
Statist efficiency.
Time series efficiency.
Intertemporal efficiency
Static efficiency
where goods and services are bought and sold
Product Markets
Government Markets
Resource Markets
Labor Markets
The economic problem of having unlimited needs and wants with only limited means to satisfy them
Opportunity cost
Absolute scarcity
Relative scarcity
Resource scarcity
Wasting resources
A point inside the PPF is
Factor Markets
Symmetric Information
How can a you increase the PPF
Collective wellbeing is maximised. Overall people get what they want.
Marginal efficiency
Intertemporal efficiency
Production efficiency
Allocative efficiency
How can a you increase the PPF
By increasing costs and reducing output per input
By decreasing productivity or reducing resources
By maintaining current productivity and resources
By increasing productivity (output per input) or finding new resources
a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology
Supply curve
Curved (bowed-out) ppf
Demand curve
Production Possibilities Frontier (PPF)
A reduction in Inter-temporal efficiency is caused by
Balancing the use of resources for today use with the future.
Wasting resources
same as Technical efficiency
Burning coal power
Intertemporal efficiency is about how well society balances current consumption with future wellbeing.
Example： Burning coal power，
Uses non-renewable resources that cannot be replaced
Causes long-term environmental damage (pollution, climate change)
Provides short-term benefits (cheap electricity)
But reduces future productive capacity and wellbeing
👉 This means society is prioritising today at the expense of the future, which reduces intertemporal efficiency.
Yes
No
A balance in information between buyers and sellers.
Symmetric Information
Asymmetric Information
Information Cost
Perfect (full) Information
Identical products
Competitive goods only
Monopolistic goods only
Homogeneous goods and services
Consumption goods only
1. Homogeneous product.
2. east of entry and exit
How can a you increase the PPF
Conditions for a perfectly competitive market
Conditions for a perfectly competitive market
A reduction in Inter-temporal efficiency is caused by
Income remaining for a person to spend or save after all taxes have been paid
GROSS INCOME
REAL INCOME
DISPOSABLE INCOME
NATIONAL INCOME
A market that meets the conditions of:
(1) many buyers and sellers,
(2) homogenous products,
(3) low barriers to entry & exit
(4) suppliers are price-takers
PUBLIC GOODS
DURABILITY OF GOODS
DYNAMIC EFFICIENCY
PERFECTLY COMPETITIVE MARKET
The amount of output compared to the amount of resources needed to make it.
SUPPLY
INVESTMENT
TECHNOLOGY
PRODUCTIVITY
An allocation of resources that promotes an ability to quickly change market conditions to respond to consumer needs
TECHNICAL EFFICIENCY
STATIC EFFICIENCY
DYNAMIC EFFICIENCY
PARETO EFFICIENCY
a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production
TECHNICAL EFFICIENCY
ECONOMIC EFFICIENCY
AVAILABILITY OF SUBSTITUTES
CONSUMER CONFIDENCE
A measure of how much a good or service is required or needed to be consumed.
PROPORTION OF INCOME
COST OF PRODUCTION
DEGREE OF NECESSITY
AVAILABILITY OF SUPPLIES
When population changes, opportunities to buy and sell change
RESOURCES
PRICE AND DEMOGRAPHICS
LIVING STANDARDS
POPULATION DEMOGRAPHICS
the degree of competition in which there are many sellers in a market and none is large enough to dictate the price of a product
OLIGOPOLY
OLIGOPOLISTIC COMPETITION
PERFECT COMPETITION
IMPERFECT COMPETITION
consumers demand more of a good when its price decreases and less when its price increases
QUANTITY DEMANDED
LAW OF DEMAND
COST OF PRODUCTION
LAW OF SUPPLY
producers supply more of a good as its price increases and less as its price falls
LAW OF SUPPLY
LAW OF DEMAND
NEEDS
COST OF PRODUCTION
