LS3 - Production Possibility Frontier

Question 1

Opportunity cost

Answer 1

Value of the next best alternative forgone

Question 2

PPF

Answer 2

Production Possibility Frontier shows the maximum potential output of a combination of two goods assuming all resources are being used

Question 3

Economic Growth

Answer 3

It is the increase in the total level of output of goods and services in an economy

Question 4

Difference between consumer goods and capital goods

Answer 4

Consumer goods are used to satisfy people’s wants and needs.
Capital goods are used to produce other goods

Question 5

Why may the point be within a curve on the PPF graph

Answer 5

• Inefficient use of resources
• Output is not maximised

Question 6

PPF Graph Axis

Answer 6

Consumer goods X axis, Capital goods Y axis

Question 7

A shift outwards / inwards of the ppf graph line indicates…

Answer 7

A shift outwards shows that the economy has grown, it can produce more of both goods. This shift is caused by economic growth or increasing the amount of resources

A shift inwards indicates that the economy is declining. It is producing fewer goods of both, perhaps due to natural disasters or a decrease in the quality of labour. Fewer resources