Production possibility curves or PPF Flashcards
1
Q
What is a PPC
A
a graph showing all the possible outcomes of an economy producing only two goods.
shows the maximum quantity of one good that can be produced fro any given production of the other good
2
Q
What is assumed in a PPC
A
Ceteris Parabus- all other factors are kept the same
———-fixed labour hours avaible
———-fixed productivity
———-fixed level of technology
The output we measure is output over a year period.
3
Q
Explain diminishing returns
A
D R= when trying to get the last bit of one product, you lose a lot more of the other product. You are losing more than you gain when maximising the production of one product, and it usually isn’t worth it.
