Production Possibilities Flashcards
Describe the operation of the production possibilities curve Differentiate between productive and allocative efficiency
the various combinations of final goods and services that could be produced in a given time period with all available resources and technology
Production Possibilities
the boundary between those combinations of goods and services that can be produced and those that cannot
production possibilities curve
shows different combinations of 2 products which can be produced with a specific set of resources and with full employment and production efficiency
production possibility curve
there is a limit to the amount we can produce in a given time with available resources and technology
scarce resources
we can obtain additional quantities of one of the goods only by reducing production of another good
opportunity costs
Each point on the curve represents some maximum output of the 2 products, which shows the limit of attainable capacity and efficient production
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Points lying inside the curve are attainable but not as desirable as points on the curve this means…
more output could be produced with available resources (inefficient production)
Points lying inside the curve imply that the economy could have more of both products if it achieved full employment and productive efficiency (where unemployment and productive efficiency occurs)
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Points lying outside the curve represent greater output than at any point on the curve, but are unattainable with current supplies of resources and technology (unless trade makes up the gap)
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Curve is concave which reflects
increasing opportunity costs
The more of a product which is produced, the greater is its
opportunity cost
if the curve shifts to the right
the economy grows because of its ability to produce a larger total output
An increase in output: and expansion of production possibilities
economic growth
_____ is caused by increasing the resources available or by producing better technology
economic growth
