Topic 2: Production Possibility Frontiers and opportunity cost Flashcards
0
Q
Opportunity cost
A
Refers to the value of the next best alternative which is forgone
1
Q
Product possibility frontier (ppf)
A
A diagram/curve that shows all the combinations of two goods or services that can be produced when all factors of production are being used in a giver period with available resources
2
Q
Free good
A
A good that has mo opportunity cost
3
Q
On a ppf graph when is:
- Below the line
- any point along the line is full capacity
- above the line
A
- below full capacity/inefficiency
- working at full capacity
- unattainable
4
Q
No opportunity cost
A
One thing does not have to be sacrificed for the next best alternative
5
Q
What occurs when there is right shift on the PPF Diagram
A
Economics growth: An expansion in the productive capacity of the economy
The PPF shifts when there is an increased availability of resources>greater production which shift the PPF
