1.1.4 production possibility frontiers

Question 1

what does the PPF curve show?

Answer 1

the maximum possible combinations of capital and consumer goods that the economy can produce with its current resources and technology

Question 2

what does a movement along the curve indicate?

Answer 2

a change in the combination of goods produced

more capital goods and less consumer goods (or vice versa)

Question 3

what does a shift of the curve indicate?

Answer 3

a change in the productive potential of the economy

more consumer and capital goods can be produced or less consumer and capital goods can be produced

Question 4

consumer goods (def.)

Answer 4

goods that are demanded and bought by households and individuals

Question 5

capital goods (def.)

Answer 5

goods that are produced in order to aid the production of consumer goods in the future