PPF Flashcards
What is PPF?
It shows the maximum amount of two goods or services an economy can produce.
The basic problem in economics?
How best to allocate scarce resources
What is a trade-off?
When you choose between conflicting objectives because you can’t achieve all your objectives at the same time
What do the point on the curve mean?
They are achievable without using any extra resources
What do the points under the curve mean?
You are productively inefficient
What do the points above the curve mean?
Isn’t achievable with the current resources
What is opportunity cost?
It is the next best thing that your forced to give up
What causes an outward shift of the PPF curve?
Increase in resources, for eg more workers or improvements in technology
What causes an inward shift an PPF curve?
Fewer resources available, for eg natural disasters
