Answer to Question #232690 in Economics for amanuel

Question

Define the following terms briefly: Production Possibility Frontier; Scarcity and Shortage; Elasticity of Demand; Inferior good and normal good; laissez faire

Answer 1

1) Production possibility frontier (PPF) is a curve illustrating the varying amounts of two products that can be produced when both depend on the same finite resources.

2) Scarcity is a naturally occurring limitation on the resource that cannot be replenished. A shortage is a market condition of a particular good at a particular price.

3) The price elasticity of demand is calculated as the percentage change in quantity divided by the percentage change in price.

4) An inferior good is a good whose demand decreases when consumer income rises (or demand increases when consumer income decreases), unlike normal goods, for which the opposite is observed. Normal goods are those goods for which the demand rises as consumer income rises.

5) Laissez-faire is an economic philosophy of free-market capitalism that opposes government intervention.