- Land (natural resources)
- Labor (work exerted)
- Capital: human (knowledge and skills a worker gains through education/experience) or physical (man-made objects made to create other goods)
- Entrepreneurship: inventive and willing to take risks
most desirable alternative given up by making a decision
Production Possibilities Curve (PPC)
- shows alternative ways to use resources
- FOUR assumptions: (1) Only two goods can be produced (2) Full employment (3) Fixed resources (4) Fixed technology
- Productive Efficiency: produce at lowest cost, full employment of resources and allocate them efficiently, produce at ANY point on the curve
- Allocative: combination most desired by society, focuses on where to produce on a certain curve
When switching production from one item to another as you increase, a higher rate of cost will be necessary to continue increasing
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