1.1.4 Flashcards
Production possibility frontiers
Production possibility frontier
A curve showing the maximum attainable quantities of different combinations of goods and services that can be produced in a set time period given the available resources and current state of technology
Capital goods
Goods that are used in the production of other goods and services
Consumer goods
Goods and services that are used by people to satisfy their needs and wants
Margin
A possible point of change eg. one more unit or one less unit
Marginal cost
The extra cost of producing one more unit of output
Long run economic growth
An increase in productive potential illustrated by an outward shift in a macro PPF
Causes of long run growth/outward shift of macro PPF
Increase in the quantity of factors of production (eg. migration or more capital through investment) or increase in quality of resources (eg. through education and training)
Possible cause of inward shift of PPF
Destruction of infrastructure due to conflict, outward migration of labour, impact of climate change on agriculture
Unemployment
A point inside the boundary where not all available resources are being used
Productive efficiency
Every point on the boundary is this type of efficient. Productive efficiency (in this context) means a given set of resources produces the maximum number of goods
Allocative efficiency
Perhaps only one point is this type of efficient - it is when an economy is producing the foods and services people most want and social welfare is maximised