4.1.1.5 Production possibility diagrams Flashcards
Students should be able to use production possibility diagrams to illustrate these features.
What is a Production Possibility Diagram?
A diagram that shows the options available when you consider the production of just two types of goods or services.
Define the term “trade off”.
A trade off occurs when you have to choose between conflicting objectives.
What is an opportunity cost?
An opportunity cost is the second best thing you have given up to have the “best thing”.
What might cause a outward shift on a PPF?
Improved technology, improvements to labor (Economic growth)
What might cause a inward shift on a PPF?
Natural disaster (Negative economic growth)
Why are all the points on a PPF productively efficient?
Because all possible resources are being used to produce the maximum possible output.
Why are all points on a PPF not allocatively efficient?
Because allocative efficiency refers to people getting what they want or need and not all points on a PPF will represent this.
What does a production possibility frontier illustrate?
The various combinations of output an economy is currently capable of producing with its limited resources.
