Ppf Flashcards
What is the Production Possibility Frontier?
It shows the maximum potential output for 2 goods or services that an economy can achieve when all its recourses are fully employed.
What are PPF diagrams
They are visual representations of the different output combinations that a business (or economy) can make of two goods.
What is opportunity cost?
The concept of sacrificing one thing for another. Sometimes we look at the second best or next best alternative not chosen as the opportunity cost.
What are Ppfs most often used to represent
Capital and consumer goods in an economy
Capital goods are
goods used by firms: they are the machines to make more products in the future
consumer goods are
goods made for consumption by individuals
What is a centrally planned economy?
An economy that prioritizes making capital goods and sacrifices making consumer goods. These are often dominated by Government activity.
What is a market economy?
An economy that focuses on making consumer goods.
Is the UK a centrally planned economy or a market economy?
It is a combination so called a mixed economy.
What happens when the Ppf curve shifts outwards?
Economic growth
Economic growth shown in a ppf curve is called?
Potential economic growth. The economy has increased its productive potential.
What is it called when a point from inside the ppf curve moves out towards the ppf curve.
real (adjusted for inflation) or actual economic growth
what does it mean if the ppf curve falls back on itself
productive capacity is physically falling. tsunami or war disrupting productive capability physically.
