Production Possibility Frontier Flashcards
1
Q
What do PPF models show
A
the economic problem
the concept of opportunity cost
all combination of certain g+s that can be produced given available resources and tech
2
Q
what are the three assumptions of the PPF
A
- fixed resources
- technology is fixed
- economy produces just the two given goods
3
Q
What does the frontier (the line) illustrate
A
the frontier shows scarcity and the trade off between producing one or the other good
4
Q
what does a straight and curved frontier line represent
A
straight: Opportunity cost along frontier is constant - as in resources can equally be used to make eg pizza and cars (unrealistic)
curved: opportunity cost fluctuates, it is not constant because different resources differ in level of productivety for different goods
5
Q
what is the law of increasing production
A
production increases as does opportunity cost
