1.1.4: Production Possibility Frontiers Flashcards
What are PPFs?
Graphs that show the maximum combinations of two products that an economy can produce (if all resources are efficiently utilised).
What is the maximum potential in an economy?
Any point on the PPF curve.
How does opportunity cost link with FFP?
When the output of one good is increased, the output of the other good decreases.
How is economic growth shown?
Outwards shift on the PPF curve. The economy has grown because it can produce more goods.
How can economic growth be achieved?
-Discovering more raw materials (e.g. discovering oil fields).
-Increasing the size of work force (e.g. immigration).
-Increasing capital stock (e.g. investment in new machines, factories).
-Increasing labour productivity (e.g. due to better technology).
How is economic decline shown?
Inwards shift on the PPF graph. The economy declines as it can produce less goods than previously.
How can economic decline occur?
-Natural disasters.
-Natural resources running out.
-War.
What is a trade-off?
The choosing between conflicting objectives.
What is economic efficiency?
When resources are allocated for their best use.
What is economic inefficiency?
When resources are not being allocated for their best use.
What does a movement along the curve indicate?
A change in the combination of goods produced.
What does the shift of the curve indicate?
A change in the productive potential of the economy.
What are capital goods?
Goods that are used to produce consumer goods and services (fixed machinery, hardware, software).
What are consumer goods?
Goods and services that satisfy our needs and wants directly.
What are the three types of consumer goods/services?
-Consumer durables: provide a steady flow of satisfaction over working life (e.g. fridge).
-Consumer non-durables: used up in the act of consumption (e.g. drinking a coffee).
-Consumer services: (e.g. a hair cut).
