1.5 Production possibility diagrams

Question 1

PPF

Answer 1

production possibility frontier - a curve depicting the various combinations of two products that can be produced when all available resources are fully and efficiently employed. can be used to illustrate the economic problem e.g economic resources, scarcity, choice, allocation of resources etc

Question 2

economic growth

Answer 2

the increase in the potential level of real output the economy can produce over a period of time

Question 3

full employment

Answer 3

when all who are able and willing to work are employed

Question 4

unemployment

Answer 4

when not all of those who are able and willing to work are employed

Question 5

choice

Answer 5

choosing between alternatives who deciding on how best to use scarce resources

Question 6

resource allocation

Answer 6

the process through which the available factors of production are assigned to produce different goods and services

Question 7

productive efficiency

Answer 7

productive efficiency for the economy as whole occurs when it is impossible to produce more of one good without producing less of another. For a firm it occurs when the average total cost of production is minimised

Question 8

allocative efficiency

Answer 8

occurs when the available economic resources are used to produce the combination of goods and services that bed matches peoples tastes and preferences