Production Possibility Frontiers (1.1.4) Flashcards
What does a PPF graph show?
Maximum possible combinations of capital and consumer goods that the economy can produce with its current resources and technology
What are the two different types of goods? (present on PPF graph)
Capital and Consumer goods
Define capital goods
Man-made products used by firms to produce other capital or consumer goods
Define consumer goods
Goods purchased for consumption and not to produce another good
Do you think we should produce more capital goods or consumer goods?
The UK has limited factors of production and so therefore we can only produce a certain combination of both
What are the two shapes that a PPF can be?
Curved and straight line PPF graphs
What is the shape that the PPF graph normally is?
Curved
What are the three points on a PPF graph?
Productively Inefficient
Productively Efficient
Unachievable
What does Productive Inefficiency Mean?
Refers to a situation where an economy or producer is not utilizing all of its resources (factors of production) in the most efficient way possible.
What does Productive Efficiency Mean?
Max units of output with the given factors of production (resources)
What does Unachievable Mean?
Refers to any point that lies outside the curve. This represents a situation where the production of goods is beyond the economy’s or producer’s capacity, given the current resources and technology.
Which point on a PPF graph represents the maximum productive potential of the economy?
Anywhere on the curved line
Slide 3 on PowerPoint
How can a PPF be used to work out the opportunity cost?
PowerPoint slide 4
How can economic growth or decline be shown on a PPF diagram?
Slide 5 on PowerPoint
What does a Straight Line PPF look like?
(Including points A,B and C and what they mean)
Slide 6
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What does a Concave PPF look like?
(Including points A,B and C)
Slide 7
State what would happen if the firm increased its factors of production (on PPF)
The PPF would shift outwards to PPF2 showing an increase in the productive capability of the firm
Slide 8
What does a fall in capital production but no change in consumer production look like on a PPF graph?
Slide 9
What does an increase in the ability to produce consumer goods but no change in capital goods look like on a PPF graph?
Slide 9
What is the difference between the PPF curve shifting and a movement along the line of the curve mean?
The PPF curve shifting- Change in productive potential of the economy. More or less consumer and capital goods can be produced. Change in number of resources/ tech available so potential output changed.
Movement along the line of the curve-Change in the combination of goods produced. Same amount of resources are allocated amongst the two goods differently
