ppf

Question 1

ppf efficiencies

Answer 1

outside ppf= impossible
inside=productively inefficient
on the line=productively efficient

Question 2

ppf oppurtunity cost

Answer 2

opportunity cost=benefit given up of the next best alternative on a ppf when can see how much we can produce of good a and see how uch of good b is being given up- looking at the point where none of good a is being produced and go down until we see how much of good a is being used up-this value is our oppurtunity cost

Question 3

oppurtunity cost from not starting point aka 1 or 0

Answer 3

is for example it asks the opportunity cost of producing a 5th flashcard we go to the point after the 4th and 5th is one up from this and this is what we are producing from the 4th one one the fifth one

Question 4

constant opportunity cost

Answer 4

with a straight line ppf there is a constant opportunity cost however in real life this is not realistic as opportunity cost increase

Question 5

increasing oppurtunity cost

Answer 5

ppf is curved due to increasing opportunity cost as there is a greater opportunity cost meaning it is a curved ppf for majority of thing we produce
example if we were russia worlds largest diamond producer and world largest oil producer and good a and good b were diamonds and oil first few barrels of oil it produces will be from the oil deposits closest to ground level- so only a few labourers and drills will be needed to extract these barrels therefore only giving up a few diamonds- however if we want to produce more barrels we will need more labour and mines- therefore more resources will be reverted from diamond production into digging oil etc the cycle continues

Question 6

allocative efficiency

Answer 6

without further/deep information we can never know at which point on the ppf is efficient particularly allocative effincy-whatever point on the ppf where consumer need are being met/ welfare being maximised-is allocatively efficient

Question 7

ppf shifts-outwards

Answer 7

population growth-mean sthere is an increase in the quantity of labour- means tha the potential output of the ecnonmy has increased-ppf shift outwards

Question 8

ppf shiftf inwards-economic shocks eg earthqwake

Answer 8

The earthquake means that there will be a decrease in the quantity of capital as machines and factories get destroyed. There may be a loss of life, which could reduce the quantity of labour. This means that the potential output of the economy will decrease, and so the PPF will shift in as shown below.

Question 9

outward shift where only one good is being impacted

Question 10

What is the most likely impact of an increase in unemployment on the PPF?

Answer 10

the PPF shows the maximum potential output given that all resources are being used efficiently. If all resources are not being used efficiently (like when there’s unemployment), this means that the economy will be actually operating within the PPF (like at point B shown). So, an increase in unemployment will move the actual economy inside the PPF but it won’t shift the actual PPF. There has been no change in the maximum potential output that the economy can produce if all resources are being used efficiently (e.g. if the unemployed workers find a job).

Question 11

ppf shifts consumer and capital goods

Answer 11

can be used to show resources being used for consumer goods and capital goods- for many economies if capital goods are heavily invested in-there’s more capital- increasing [productivity-increasing growth-shifting the ppf outwards