Production Possibility Frontier (PPF) Flashcards
What is a PPF?
A PPF is a economic model (Simplification of Reality).
What does the PPF show?
Alternative combinations of two goods and services when all resources are fully and efficiently employed.
What is Pareto Efficiency?
When a country can only produce more of one good if it produces less of another.
What does productive efficiency mean?
Producing at lowest cost.
What is a economic model?
Simplification of reality.
What is a PPF a simplification of?
An economy (country)
What are capital goods?
Goods that are used to produce consumer other goods and services.
How can we achieve economic growth? (4 factors)
Increase Quality of factors of production
Increase in the quality of resources
Investment (increase in capital stock)
Improvement in technology
Link between unemployment and recession?
Recession leads to unemployment.
What is economic recovery? (PPF)
Increase in real GDP to get back on to the PPF.
What is the Skewed shift of PPF
Improvement in technology available to produce capital goods will
lead to a outward shift on the PPF.
How does higher productivity cause a outward shift?
Increases output per unit of input used in production.
How does better management of factor inputs lead to a outward shift?
Improved management reduces waste and improves quality.
How does increase in the stock of capital and labour supply cause a outward shift?
Inward labour migration/ capital investment
