Production Possibility Curve (PPC) Flashcards
What is a production possibility curve?
A curve showing the maximum combinations of goods or services that can be produced in a set period of time with the given available resources.
What s a trade off?
When te choice of one alternative requires the sacrifice of another.
Give an example of a trade off.
When there is a decision that forces the sacrifice of doing or making one thing in favour of another thing, e.g maths homework instead of economics homework.
What other names can be given to a PPC curve?
A production possibility frontier (PPF).
What are capital goods?
The goods used as part of the production process, such as machinery or factories.
What are consumer goods?
Goods produced for consumption.
Why is a PPC curve curved?
When modes of production are combined more is produced. E.g a farmer can produce just potatoes or just produce carrots the allocation will be more efficient when in slight favour of one thing.
What are capital goods used for?
To further increase the capacity of the economy in the future.
What are consumer goods used for?
Used to create utility for consumers.
What is productive efficiency?
Where firms produce goods and services at the lowest cost they can achieve.
What is allocative efficiency?
Where firms produce goods that consumers are demanding the most of, if something is perfectly allocatively efficient then consumers needs and wants are met perfectly.
What is long-run economic growth?
An expansion in the productive capacity of the economy.
How are capital goods related to long-run economic goods?
If capital goods are invested in then the economy will grow in the long run therefore long-run economic growth can be achieved.
What does a shift in the position of the PPC curve suggest?
It suggests and change in the capacity in the factors of production, the labour/land/capital/enterprise may change in capacity.
