1.1.4: The PPF Flashcards
1
Q
What is productivity?
A
- It relates to how much can be produced with a given set of resources (inputs/ factors of production)
2
Q
What are PPFs?
A
- Production Possibility Frontiers
- They show the maximum productive potential of a firm/ market/ economy
- They also show the opportunity cost of the scarce resources
3
Q
Why is the shape of the PPF concave?
A
- This is as the more that is produced of one, the greater the opportunity cost there is for the other
4
Q
How does an increase in productive potential change the PPF?
A
- an increase in quantity/ quality of resources, shifts the curve outwards
- examples of this include: better machinery/ technology, workers becoming more skilled
5
Q
How does a decrease in productive potential change the PPF?
A
- a decrease in quantity/ quality of resources, shifts the curve inwards
- examples include higher unemployment, COVID19
6
Q
What are the two type of goods?
A
- Capital Goods
- Consumer Goods
7
Q
What are consumer goods?
A
- They are goods that cannot be used to produce other goods eg clothing
8
Q
What are capital goods?
A
- They are goods which can be used to produce other goods such as machinery
9
Q
What is allocative effiecny?
A
- A concept that measures how well resources are allocated to produce the most value for society
10
Q
What is productive effiency?
A
- producing goods and services to produce maximum output for the minimum cost
