1.1.4 Production Possibility Frontiers

Question 1

What does a production possibility frontier (PPF) show?

Answer 1

It shows the maximum possible combinations of capital and consumer goods that the economy can produce with its current resources and technology

Question 2

Outcomes on a PPF:

Answer 2

Efficient = On curve
Inefficient = Inside the PPF
Unattainable = Outside the PPF

Question 3

What shows economic growth on a PPF?

Answer 3

A shift outwards ( to the right )
(Q^2 CELL)

Question 4

how does a PPF illustrate the concept of opportunity cost?

Answer 4

It demonstrates that to produce one good you must give up a different good, which would be the opportunity cost.

Question 5

What factors would cause an outward shift in a PPF?

Answer 5

Outward/ Rightward shift: Indicates an increase in the economy’s capacity to produce more.

• Increase in Resources (more labour, capital or natural resources)

• Technological Advancements (improvements in technology that increase productivity)

• Improvements in Human Capital (Better education and skills enhance productivity)

• Enhanced infrastructure (Better transportation and communication systems)

Question 6

What factors would cause an inward shift in a PPF?

Answer 6

Inward/leftward shift: Indicates a decrease in the economy’s capacity to produce goods, meaning less output can be achieved with the available resources.

• Decrease in Resources (Loss of labour, capital or natural resources)

• Technological decline (Technological setbacks or obsolescence)

• Economic decline (Negative economic factors like recession, natural disasters, or war)

Question 7

Capital Goods

Answer 7

Capital goods are produced in order to aid the production of consumer goods in the future.

Question 8

Consumer goods

Answer 8

Consumer goods are goods that are demanded and brought by households and individuals.