1.1.4 PPFs Flashcards
1
Q
What does a PPF show?
A
The maximum possible combinations of goods (Often capital and consumer goods or goods vs services) that the economy can produce with its current resources and technology.
It shows the opportunity cost of producing at different levels.
2
Q
What is a capital good?
A
A good used by firms to produce a consumer good.
For instance, Machinery.
3
Q
Desribe a PPF
A
Increase in LRAS caused this shift.
If there was breakthroughs in service production - the line would anchor at “goods” and extend for services.
4
Q
What do different points on a PPF mean?
A
Within the Curve - Possible but not maximising output.
On the Curve - Resources allocated efficiently.
Beyond the Curve - Unobtainable with current technology or resources.
