PPF

Question 1

What could a point lying inside the PPF, not on it, be considered?

Answer 1

attainable, but it is inefficient.

unemployed resources.

It would be possible to increase the production of both goods, so that point is inferior compared to points on the frontier.

Question 2

Define the Law of increasing opportunity cost

Answer 2

The opportunity cost of increasing the production of one good in an economy with scarce resources normally decreases the production of the other good

Question 3

Why is the PPF sometimes straight, and sometimes bowed outward

Answer 3

If the PPF is straight it indicates that Resources are equally suited to producing all types of goods.

That would be very unlikely

When the productivity of resources differs between types of goods, then the PPP will be ‘bowed’ outwards.

The bow happens because of the law of increasing opportunity cost

Question 4

What can economic growth occur as a result of

Answer 4

an increase in the quantity of resources or an improvement in their quality.

Question 5

Define Demand

Answer 5

The quantity of goods and services consumers are willing to buy at a given price.

Question 6

Define Supply

Answer 6

The quantity of goods and services firms are willing to produce at a given price.

Question 7

Why is the ppf negatively sloped

Answer 7

This is due to scarcity, to increase production the of one good means that the production of another good decreases