THE ECONOMIC PROBLEM -When an economy moves from one point to another, it
means the number of capital goods and consumer goods
produced changes; one decreases and the other increases.
THE PROBLEM OF SCARCITY
-If a country’s economy moves up the PPC, it means the
FINITE RESOURCES:
number of capital goods produced will increase while
-Land, labor, capital and enterprise are all finite and
number of consumer goods will decrease. This will
limited/scarce resources.
probably mean the country will have more consumer
-Some resources are scarcer in some countries than
goods in the future but lesser in the present. This is an
others, and some countries are not able to exploit their
opportunity cost.
resources due to an inability in investing or financing.
UNLIMITED WANTS:
-Needs are basic requirements for human survival, and
wants are additional desires. Wants are always infinite.
THE ECONOMIC PROBLEM
-A nation has to decide how to allocate its limited
resources between different, unlimited wants.
-The nation has to decide on what to produce, how to
produce and for whom to produce.
OPPORTUNITY COST
-When making a choice between investing in doing
multiple things, the opportunity cost is the cost of the
next best alternative given up.
-Government expenditure can’t be spent on doing
everything, so sacrifices have to be made to choose the
best alternative.
PRODUCTION POSSIBILITY CURVES
(PPCs)
-A PPC shows the different combinations of consumer
goods and capital goods that can be produced if a
country uses all of its resources.
-Any point outside of the PPC is represents an
impossibility, and any point inside the PPC represents a
combination of good that means not all the country’s
resources are being used.
FACTORS THAT SHIFT THE PPC OUTWARDS
(ECONOMIC GROWTH):
-New technology.
-Improved efficiency.
-Education and training.
-New resources.
THE SHIFT OF AN ECONOMY FROM ONE POINT
ON THE PPC TO ANOTHER:
Hamad Mohammed | 11D
, ECONOMIC ASSUMPTIONS social enterprises, which do operate commercially but
mainly aim to maximize improvements in human or
UNDERLYING ASSUMPTIONS IN environmental well-being.
-Firms may be hindered from maximizing profit if ample
ECONOMICS
amount of influential information and data is not
CONSUMERS AIM TO MAXIMIZE THEIR
available to them.
BENEFIT:
-The consumer will always buy the product with the
right balance of price and quality.
-If a consumer can choose from three producers with the
exact same product, they will choose the one with the
lowest price.
-If a consumer can buy from three producers with a
product at the same price, they will choose the one with
the best quality.
BUSINESSES AIM TO MAXIMIZE THEIR PROFIT:
-Businesses always aim to maximize their revenue and
profit, meaning they will charge the highest price a
market can stand.
-Businesses will always want to buy good-quality raw
materials at the lowest possible price.
REASONS WHY CONSUMERS MAY NOT
ALWAYS MAXIMIZE THEIR PROFIT
-Consumers may have difficulty in calculating the
benefits and satisfaction they will get from consuming a
product.
-Some consumers adhere to habits or ‘brand loyalty’,
and ignore products with better value.
-Consumers may succumb to peer pressure or be
influenced by the behavior and opinions, and choose
products that don’t offer the best value.
-Consumers may not have full information about the
range of products or other important intel.
REASONS WHY PRODUCERS MAY NOT
ALWAYS MAXIMIZE THEIR PROFIT
-The performance of the business may be influenced by
behavior of other people in the organization, such as
delegates who have other objectives than the owner.
-Some producers have alternative business objectives,
such as giving high-quality customer service, and incur
extra costs (such as money spent on training the staff)
that reduce profitability.
-Some commercial enterprises operate as charities,
which are often not-for-profit organizations.
-An increasing minority of businesses are being set up as
Hamad Mohammed | 11D
means the number of capital goods and consumer goods
produced changes; one decreases and the other increases.
THE PROBLEM OF SCARCITY
-If a country’s economy moves up the PPC, it means the
FINITE RESOURCES:
number of capital goods produced will increase while
-Land, labor, capital and enterprise are all finite and
number of consumer goods will decrease. This will
limited/scarce resources.
probably mean the country will have more consumer
-Some resources are scarcer in some countries than
goods in the future but lesser in the present. This is an
others, and some countries are not able to exploit their
opportunity cost.
resources due to an inability in investing or financing.
UNLIMITED WANTS:
-Needs are basic requirements for human survival, and
wants are additional desires. Wants are always infinite.
THE ECONOMIC PROBLEM
-A nation has to decide how to allocate its limited
resources between different, unlimited wants.
-The nation has to decide on what to produce, how to
produce and for whom to produce.
OPPORTUNITY COST
-When making a choice between investing in doing
multiple things, the opportunity cost is the cost of the
next best alternative given up.
-Government expenditure can’t be spent on doing
everything, so sacrifices have to be made to choose the
best alternative.
PRODUCTION POSSIBILITY CURVES
(PPCs)
-A PPC shows the different combinations of consumer
goods and capital goods that can be produced if a
country uses all of its resources.
-Any point outside of the PPC is represents an
impossibility, and any point inside the PPC represents a
combination of good that means not all the country’s
resources are being used.
FACTORS THAT SHIFT THE PPC OUTWARDS
(ECONOMIC GROWTH):
-New technology.
-Improved efficiency.
-Education and training.
-New resources.
THE SHIFT OF AN ECONOMY FROM ONE POINT
ON THE PPC TO ANOTHER:
Hamad Mohammed | 11D
, ECONOMIC ASSUMPTIONS social enterprises, which do operate commercially but
mainly aim to maximize improvements in human or
UNDERLYING ASSUMPTIONS IN environmental well-being.
-Firms may be hindered from maximizing profit if ample
ECONOMICS
amount of influential information and data is not
CONSUMERS AIM TO MAXIMIZE THEIR
available to them.
BENEFIT:
-The consumer will always buy the product with the
right balance of price and quality.
-If a consumer can choose from three producers with the
exact same product, they will choose the one with the
lowest price.
-If a consumer can buy from three producers with a
product at the same price, they will choose the one with
the best quality.
BUSINESSES AIM TO MAXIMIZE THEIR PROFIT:
-Businesses always aim to maximize their revenue and
profit, meaning they will charge the highest price a
market can stand.
-Businesses will always want to buy good-quality raw
materials at the lowest possible price.
REASONS WHY CONSUMERS MAY NOT
ALWAYS MAXIMIZE THEIR PROFIT
-Consumers may have difficulty in calculating the
benefits and satisfaction they will get from consuming a
product.
-Some consumers adhere to habits or ‘brand loyalty’,
and ignore products with better value.
-Consumers may succumb to peer pressure or be
influenced by the behavior and opinions, and choose
products that don’t offer the best value.
-Consumers may not have full information about the
range of products or other important intel.
REASONS WHY PRODUCERS MAY NOT
ALWAYS MAXIMIZE THEIR PROFIT
-The performance of the business may be influenced by
behavior of other people in the organization, such as
delegates who have other objectives than the owner.
-Some producers have alternative business objectives,
such as giving high-quality customer service, and incur
extra costs (such as money spent on training the staff)
that reduce profitability.
-Some commercial enterprises operate as charities,
which are often not-for-profit organizations.
-An increasing minority of businesses are being set up as
Hamad Mohammed | 11D
