Production Possibility Curve

Question 1

What are the assumptions of the PPC?

Answer 1

The assumptions of the PPC are: all resources and technology is fixed; all resources can be used to produce the products; all resources are used efficiently to produce the products; only 2 products are produced in a simple economy and ceteris paribus.

Question 1

What is the purpose of PPC?

Answer 1

To demonstrate how an economy is producing, how an economy is using their resources, what an economy is producing.

Question 2

What factors would move the PPC outwards?

Answer 2

Four factors of production!
Land eg. Better use of land, invest in more land
Labour eg. Unskilled, skilled, mental, physical
Capital eg. Invest in more machinery, better technology

Question 3

Which PPC graph is this?
| )
| )
| )
| —— @ )
| | )
_ _ _ _ _ __ _ _ _ _ _ _ _ _ _

Answer 3

Under-utilisation of Resources

Question 3

Which PPC graph is this?
| -> )
| ) -> )
| ) -> )
| ) -> )
_ _ _ _ _ _ _ _ _ _ _ _ _

Answer 3

Economic growth

Question 4

Which PPC graph is this?
(On the line)

Answer 4

Efficiency

Question 5

What is ceteris paribus?

Answer 5

An assumption. All other things are held equal.