LS3 - PPF Flashcards
What does PPF stand for?
Production Possibility Frontier
What is opportunity cost?
The benefits of the next best alternative given up
How is opportunity cost useful to consumers?
It helps them decide what to spend their money on
How is opportunity cost useful for producers?
It helps them decide what and how to produce goods and services
How is opportunity cost useful for the government?
It helps them decide what policies to enact
What does PPF show?
The maximum potential output of 2 goods or services that an economy can achieve while producing at its maximum efficiency
What would cause an inward shift of PPF?
Negative economic growth
What would cause an outward shift in PPF?
Economic growth
What would cause economic growth?
An increase in the quantity and / or quality of the factors of production
What would cause negative economic growth?
A decrease in the quantity and / or quality of the factors of production
What does an economy being under its PPF curve imply?
There is an inefficient use and / or underutilisation of resources
What is a consumer good?
A good which does not create other goods, and instead satisfies consumer needs and wants
What is a capital good?
A good which is used to make more goods
If an economy is on its PPF curve, what does that imply?
That there is an efficient allocation of resources within the economy
Why are capital goods good for the economy?
An increase in capital goods would lead to a long-term increase in the productive potential of an economy
