Production possibility frontier Flashcards
Define PPF
The production possibility frontier (PPF) is a curve showing the maximum combinations of goods or services that can be produced in a given period with available resources
Define capital goods
Capital goods are goods that are used as part of the production process. They are used to increase the future capacity of an economy
Define consumer goods
Consumer goods are goods produced for present use
How is the maximum productive potential shown on a PPF?
The curve
How is efficient allocation of resources shown on a PPF?
Producing anywhere along the curve
How is inefficient allocation of resources shown on a PPF?
Producing anywhere within the curve
How can the unobtainable point be shown on a PPF?
Producing beyond the PPF
How is opportunity cost shown on a PPF?
A shift along the curve from one point to another
How cam marginal analysis be used in PPF?
It can be used to see the opportunity cost of producing one more unit
How is economic growth shown on the PPF?
A shift of the curve to the right
How is economic growth caused in the PPF?
An increase in the quantity and quality of the factors of production
How is economic decline shown on the PPF?
A shift of the PPF to the left
How is economic decline caused in the PPF?
A reduction in an economy’s production capacity
