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What is normative theory of accounting?

Unlike positive accounting which is based on observation, normative accounting theory advises policy makers on what should be done based on a theoretical principle; it starts with a theory and deduces specific policies from this.

What is the difference between positive economics and normative economics?

Positive economics describes and explains various economic phenomena or the “what is” scenario. Normative economics focuses on the value of economic fairness, or what the economy “should be” or “ought to be.” Most public policy is based on a combination of both positive and normative economics.

What are the three central problems of the economy do you have any solutions for these?

At the micro level, every economy faces three central problems. These are: (1) what to produce? (2) how to produce? and (3) for whom to produce? These are the three important offshoots of the basic problem that resources are limited and demand are unlimited.

What are the solutions to central problems of an economy?

Answer: Basic problems in Capitalist economies are solved through price mechanism, in Socialist economy through planning and in mixed economy through price mechanism and economic planning. Every economic activity in Capitalist economy is influenced by profit motive.

What are the central problems of an economy class 12?

Scarcity of resources having alternative uses in relation to demand gives rise to the problem of choice-called central problem. Every economy has to decide how much resources are to be used in production of different goods and services. Thus, allocation of resources is the fundamental problem.

3. Production Possibility Curve (PPC) It is a curve which shows various production possibilities with the help of given limited resources and technology. It is also known as production possibility frontier and transformation curve. it is a tool which can help to solve the central economic problems.

How PPC can solve central problems of an economy & draw PPC showing the following situations?

Answer: PPC refers to Production Possibility Curve. As we know central problem deals with the production and allocation problems related to the resources so we can infer that it solves the central problem of an economy by the production of two goods using sufficient resources and technology.

How does PPC show scarcity?

Key model. The Production Possibilities Curve (PPC) is a model that captures scarcity and the opportunity costs of choices when faced with the possibility of producing two goods or services. Points on the interior of the PPC are inefficient, points on the PPC are efficient, and points beyond the PPC are unattainable.

Why PPF is bowed outward?

The production possibilities curve is bowed in shape because of the law of increasing opportunity cost, which explains the idea that the more units of a product are produced, the less capability the economy has of producing other products.

What causes the production possibilities curve to shift outward?

Outward or inward shifts in the PPF can be driven by changes in the total amount of available production factors or by advancements in technology. If the total amount of production factors like labor or capital increases, then the economy is able to produce more goods at any point along the frontier.

What are the 3 shifters of PPC?

Terms in this set (3)

  • Shifters of the PPC (3) Change in resource quantity. Change in technology. Change in trade.
  • Demand Curve Shifters (5) Change in Taste and Preference. Number of Consumers. Price of Related Goods. Income.
  • Supply Curve Shifters (6) Prices / Availability of Inputs. Number of Sellers. Technology.

What 3 things would make the PPC curve shift outward?

Ways of causing an outward shift of a country’s production possibility frontier:

  • Investment in capital i.e. plant and machinery and new technology.
  • Inward migration of younger, skilled workers.
  • Discovery of new natural resources.
  • Improved education, training and healthcare to lift labour productivity.

How does technology affect the production possibilities curve?

For the economy as a whole, an improvement in technology shifts the production possibilities frontier outward. Producers respond to the cheaper production process by increasing output, shifting the supply curve outwards.