2. Production Possibility Curves Flashcards
What is a PPC?
A graph showing the maximum output combination of two goods that can be produced given that all resources and technology available are used in the most efficient way
How many goods are there on a PPC graph?
Two
What does it mean if the curve is bowed outwards?
It means that the resources are more suited to producing one good more than another.
What does it mean if the curve is straight?
It shows that resources are equally efficient for producing either good.
What does a PPC look like?
The x and y axis are labeled with the name of the good and its units. There is a curve with multiple points on it. The points represent the production possibilities.
Explain all the different points.
Points inside the curve mean production can be increased.
Points along the curve demonstrate the resources being used to produce each good.
Points outside the curve means it is impossible to obtain that Production possibility
What is allocative effficiency?
iIt s a single point on the PPC which shows the combination of goods that consumers ACTUALLY want or when it is NOT possible to make someone better off without making someone worse off.
What might happen to make the curve grow outwards?
Economic growth and increase in the resources available
What might happen to make the curve grow inwards?
Production inefficiency
