PPC curve Flashcards

1
Q

What Production Possibility Curve (PPC) illustrates

A
  • concepts of scarcity,
  • choice and
  • opportunity cost
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2
Q

Define PPC

A
  • all possible combinations of 2 gds country can produce
  • specific time period
  • full and efficient use of resources
  • at any given state of tech
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3
Q

Assumptions

A
  • produce only 2 types of gds with resources
  • fixed quantity and quality of resources
  • full employment
  • fixed state of tech
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4
Q

Complete specialisation

A
  • all resources used to produce only 1 gd, none of the other
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5
Q

Points along PPC cruve

A
  • combination of 2 gds

- choice

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6
Q

Points inside PPC curve

A
  • attainable
  • inefficient
  • resources not fully utilised
  • under employment / unemployed
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7
Q

Points outside PPC curve

A
  • ideal
  • unattainable
  • scarcity of resources
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8
Q

Negative and concave slope

A
  • law of increasing opportunity cost
  • successive increase in 1 gd
  • more of the other given up
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9
Q

Why opportunity cost increase along PPC

A
  • FOP are not homogenous/identical
  • depends on suitability of resources
  • e.g. labour btr suited for food production transferred to machine production
  • inefficient, more food forgone
  • shows opportunity cost of machine production
  • opp cost not fixed, can change accordingly based on suitability of resources
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10
Q

Movement onto PPC

A
  • frm inside PPC to on PPC
  • from unemployed/underemployed to fully employed
  • suggests all resources are utilized efficiently
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11
Q

Shifts of PPC

A
  • quantity of resources
  • quality of resources
  • state of tech
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12
Q

Improvement of tech (shift)

A
  • outward shift

- e.g. R&D results in advanced equipment

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13
Q

Increase in quantity of resources

A
  • outward shift
  • e.g. increased qty of land thru land reclamation
  • e.g. increased qty of labour (foreign workers, relaxing immigration rules)
  • decrease: e.g. pandemic, high death rates (inward)
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14
Q

Increase quality of resources

A
  • outward shift

- thru training, workshops e.g. MySkillsFuture

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15
Q

How do these 3 factors result in outward shift

A
  • increase productive capacity
  • ability to produce gds and svs
  • illustrates economic growth
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