1.1.4 PPF Flashcards
What does a choice involve in economics?
what is idea used?
A choice involves a tradeoff.
The “marginal” idea is used for examples what are the benefits and costs of consuming a little extra of a product.
What are the two types of resources in an economy?
human and physical.
What are the factors of production?
CAPITALl- resources that can be used to provide a good or services eg (machinery)
ENTERPRISE- the risk taker that links together the 3 other factors of prodcution
LAND- the physical land that is worked on or the natural resources
Labour- the skill needed to provide a good or service.
What does PPF stand for?
Production possibility frontier.
What is a PPF
A PPF shows all the possible combinations of 2 goods that be produced, when all the factors of production are being used efficiently given the current rate of technology.
How can a PPF be used?
What does it usually compare?
it can show the maximum level of production and the different combinations of production.
Usually compares capital goods and consumer goods.
Why can PPF be flawed
- Can be flawed as it may need to be changed frequently,
- it is an oversimplified version of reality so may be inaccurate.
What is the difference between consumer goods and capital goods?
- Consumer goods are utilised by the consumer.
- capital goods are needed to make consumer goods.
What else can a PPF show?
It can show opportunity cost (what is lost)
Points inside the PPF can show unemployed resources
What are the two types of PPF graph?
what is the difference?
Straight line.
Curved PPF.
A straight line PPF has constant returns.
A curved PPF has changing/diminishing returns.
What does it mean if a PPF shifts?
What are the two different shifts?
If a PPF shifts there has been a change in the quantity of quantity of the factors of production.
It can shift to the right (when potential output increases)
It can shift to the left when potential output decreases.
Why could a PPF shift to the right? (3)
Innovation
immigration
Discovery of new natural resources.
Why would a PPF shift to the left (3)
Natural disaster
Emigration
Recession
Finite resource running out
