PPC curve Flashcards
1
Q
What Production Possibility Curve (PPC) illustrates
A
- concepts of scarcity,
- choice and
- opportunity cost
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
3
Q
Assumptions
A
- produce only 2 types of gds with resources
- fixed quantity and quality of resources
- full employment
- fixed state of tech
4
Q
Complete specialisation
A
- all resources used to produce only 1 gd, none of the other
5
Q
Points along PPC cruve
A
- combination of 2 gds
- choice
6
Q
Points inside PPC curve
A
- attainable
- inefficient
- resources not fully utilised
- under employment / unemployed
7
Q
Points outside PPC curve
A
- ideal
- unattainable
- scarcity of resources
8
Q
Negative and concave slope
A
- law of increasing opportunity cost
- successive increase in 1 gd
- more of the other given up
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
10
Q
Movement onto PPC
A
- frm inside PPC to on PPC
- from unemployed/underemployed to fully employed
- suggests all resources are utilized efficiently
11
Q
Shifts of PPC
A
- quantity of resources
- quality of resources
- state of tech
12
Q
Improvement of tech (shift)
A
- outward shift
- e.g. R&D results in advanced equipment
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)
14
Q
Increase quality of resources
A
- outward shift
- thru training, workshops e.g. MySkillsFuture
15
Q
How do these 3 factors result in outward shift
A
- increase productive capacity
- ability to produce gds and svs
- illustrates economic growth