3. Production Possibility Frontier

Question 1

What is Oppurtunity Cost

Answer 1

Opportunity Cost occurs whenever a decision or choice is made.

Question 2

What is PPF

Answer 2

Maximum production potential economy

Question 3

What does PPF assume?

Answer 3

fixed or level if resources
technology is fixed
Economy produces 2 things (eg pizza and coke)

Question 4

Formula for calc Oppurtunity Cost

Answer 4

Oppurtunity cost=what is given up/what is gained

Question 5

Eg of oppurtunity cost

Answer 5

moves from 15million cans to 12 million cans so therefore moving from 0 to 2million pizzas
Oppurtnuity cost =3/2=1.5

Question 6

Why is normal sahpe of PPF owed outwards

Answer 6

Due to law of increasing oppurtunity cost.

Question 7

What is law of increasing oppurtunity cost?

Answer 7

: As you increase the production of one good, the opportunity cost to produce the additional good will increas

Question 8

What is economic growth?

Answer 8

Economic growth refers to an increase in capacity of an economy to produce goods and services.

Question 9

How can economic growth occur?

Answer 9

EG can occur as a result of an increase in the quantity of resources or the improvement in quality of resources