1.1.4 - Production Possibility Frontiers Flashcards
What Does PPF Stand For?
Production possibility frontiers.
What Is A PPF?
Is an economic model that considers the maximum possible production that a country can generate if it used all of its FOP to produce only 2 goods and services with its current resources and technology.
What Is On The Axes Of A PPF?
Capital and consumer goods.
What Are Capital Goods?
Assets that help a firm or nation to produce output.
What Are Consumer Goods?
Are end products and have no future productive use.
What Does A Movement In The PPF Indicate?
A change in the combination of goods produced.
What Does A Shift In The PPF Indicate?
A change in the productive potential of the economy.
What Is Opportunity Cost?
The cost of the next best alternative forgone after a decision is made.
What Shows Constant Opportunity Cost?
Drawing the PPF linear.
What Shows Increasing Opportunity Cost?
A concave line.
What Are Problems With Opportunity Cost?
(4 Points)
~ Not all alternatives are known.
~ Some factors don’t have alternative uses.
~ Lack of information and cost.
~ Some factors can be hard to switch to an alternative use.
What Does An Outward Shift In The PPF Lead To?
Economic growth.
What Does An Inward Shift In The PPF Lead To?
Economic decline.
What Is Allocative Efficiency?
Whether what is being produced is meeting consumer demands.
What Is Pareto Efficiency?
Nobody can be made better off without somebody being made worse off.
