AS Economics
Objectives
Recap
Define
and give examples of a command economy. and give examples of a market economy. the three functions of prices and profits.
Define
Describe
C B Computer Software
B Computer Software
B Computer Software
The previous diagrams all show a level of output that is using all resources to their maximum potential. Any point on the PPB is where resources are being used efficiently. The points do not indicate whether or not they are the right combinations for maximising economic welfare.
Productive Efficiency
The
previous diagrams show productive efficiency and allocative efficiency. is when a firm operates at average minimum total cost, producing the maximum possible output (goods/services) from inputs (raw materials) into the production process.
This
Allocative Efficiency
This
is achieved in an economy when it is not possible to make anyone better off without making someone else worse off.
Or
you cannot produce one good without making less of another. at any points on the curve.
Achieved
SPEED DATING
Productive Inefficiency
E
Apple iPods F H G Pt E & G show allocative efficiency.
J Computer Software
Productive Inefficiency
Any
point within the PPB shows some resources are not being used. F shows that 0H iPods and 0J software is produced. it is possible to increase output of one good, without reducing the other.
Point
However,
Productive Inefficiency
E
Apple iPods F H
Pt F some resources not being used, which could have made society better off if used efficiently.
J Computer Software
Choice
The
PPD shows a potential range of choices. know what the best choice is.
Dont But
if all resources are used to the maximum potential we would achieve a point on the PPB
Apple iPods
Computer Software
Opportunity Cost
E
Opportunity Cost
Apple iPods
H 0
F Computer Software
All points on the PPB are productively efficient and allocatively efficient
Points within the PPB are not using resources efficiently. Therefore possible to increase output without any changes in resources.
Shifts between two points on the PPB will carry an opportunity cost.
Team Teaching
1)
2)
3)
Conflicts (trade offs) between economic objectives, such as building hospitals and building new road networks.
Criticise the theory.
4)