Production Possibility Frontier PPF Flashcards
what does the PPF show
the PPF shows the maximum possible combinations of capital and consumer goods and that the economy can produce with its current resource and tech
what does the original PPF curve show
the curve shows the maximin productive potential of the economy.
it implies that all resources are fully efficiently employed. Meani9ng that the maximum productive potential of an economy and that resources are being used efficiently.
what does it tell about the economy if its operation inside the PPF?
It would indicate that there are unemployed resources in the economy. for examples some workers may be unemployed or machinery may be unused. Meaning that resources are not being allocated efficiently.
Economic decline (PPF)
if the PPF curve shifts inwards, its a decline in the economy as its producing less goods then previously. this can be caused by a number of factors such and natural disaster, resources are running out, decrease in quantity and quality of labour.
Economic growth (PPF)
If the PPF curve shifts outwards, this is because the economy has grown. this maybe through increasing quantity and quality of resources.
Change in production (PPF)
change in production can only effect capital goods or consumer goods. it may not effect both of them. this could be because of a fall in efficiency or a change in resources that will only effect capital goods or consumer goods manufacture
Movements along the PPF curve
this indicated a change in the combination of goods produced
Shifts in the PPF curve
this indicated a change in the productive potential of the economy.there has been a change in the number of resources or technology available to the country and so thri national output has changed.
Consumer goods
goods that are demanded and bought by households and individuals
Capital goods
Goods that are produced in order to aid the production of consumer goods in the future.
