Introduction to Economics Test - 2

When an economy produces on PPC it mean there is no unemployment and all the resources are fully and being used efficiently but practically . If there is unemployment or inefficient use of resources an economy will operate inside the PPC.

Sale of patent is not an operating activity. Profit on sale of patents will be deducted in operating activities and sale price Rs.22,000 will be added in investing activities.

Technology is the advancement of the society as a whole. Better technology means that you can figure out more efficient production techniques thereby leading the economy to create a scope to move the PPC further to the right.

In Economics, goods are materials that satisfy human wants and provide utility. A good may be a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it.

The most common reason a PPF would shift is because of a change in technology, or because of economic growth.

PPFs are normally drawn as bulging upwards or outwards from the origin ("concave" when viewed from the origin), but they can be represented as bulging downward (inwards) or linear (straight), depending on a number of assumptions. A PPF illustrates several economic concepts, such as  scarcity of resources, opportunity cost, productive efficiency, allocative efficiency, and economies of scale.

The movement along the PPC from left to right shows that in order to produce more units of capital goods, the economy must sacrifice some amount of consumer goods.

Economic resources are the assets which an economy may have available to supply and produce goods and services to meet the ever changing needs and wants of individuals and society as a whole.

Since human wants are unlimited and the means to satisfy them are limited, every society is faced with the fundamental problem of choosing and allocating its scarce resources among alternative uses. The production possibility curve or frontier is an analytical tool which is used to illustrate and explain this problem of choice.

Opportunity cost, also known as alternative cost, is the value (not a benefit) of the choice of a best alternative cost while making a decision. A choice needs to be made between several mutually exclusive alternatives; assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that would have been had by taking the second best available choice.