Trade-offs- Alternatives that we give up whenever we choose one course of action over another

Opportunity Cost- The next best alternative

Production Possibility Curve (PPC), Frontier (PPF), Graph (PPG)- To show alternative ways to use an economy’s resources

4 Assumptions of a PPG

• Ø  Two Goods
• Ø  Fixed Resources (Land, Labor, Capital, Entrepreneurship)
• Ø  Fixed Technology
• Ø  Full Employment of Resources

Efficiency- Using resources in such a way as to maximize the production of goods and services

Allocative Efficiency- The products being produced are the ones that are most desired by the society

Productive Efficiency- Products are being produced in the least costly way; Any point on the PPC

Underutilization- Using fewer resources than an economy is capable of using