1.4 Production Possibility Curves

Question 1

Define a PPC

Answer 1

An economic model that displays the maximum combination of two goods that can be produced by an economy with all the available resources.

Question 2

What does a point under the PPC mean?

Answer 2

Inefficient use and allocation of resources

Question 3

What does a point on the PPC mean?

Answer 3

Efficient use and allocation of resources

Question 4

What does a point outside the PPC mean?

Answer 4

Unattainable, as it is beyond the scope of the economy’s existing resources

Question 5

List 3 ways for an outward shift to occur on a PPC

Answer 5

• Discover new raw materials
• New Technology
• Increase in labour force

Question 6

List 3 ways for an inwards shift to occur on a PPC

Answer 6

• Depletion of resources
• Natural Disasters
• Low investments in technology