1.1.4 Production Possibility Frontier Flashcards
what does ppf show
depicit the maximum productive potential of an economy when resources are fully and efficiently employed
where would an unattainable point lie on the ppf
outside the ppf
where would an inefficient point lie on the ppf
inside the ppf
where would the most efficient point lie on the ppf
on the ppf line/curve
how is economic growth shown on a ppf
the line shifting outwards
how is economic decline shown on a ppf
the line shifting inwards
why would the ppf shift inwards
- if there is a decrease in the quality or quantity of resources in an economy
- impact of deep economic recession
- over-exploitation of scarce resources
why would the ppf shift outwards
- if there is an increase in the quality or quantity of resources in an economu
- if an industry achieves a rise in efficiency
- advances in the state of technology
what are capital goods
goods which can be used to produce other goods eg. machinery
what are consumer goods
goods which cannot be used to produce other goods eg. clothing
what is marginal analysis
an evaluation of any incramental change in production
what explains the shape of the ppf
marginal analysis combines with opportunity cost
what is opportunity cost
value of the best alternative forgone
what does movement along the ppf represent
a trade off in production possibilites
