PPF Flashcards
1
Q
Production possibility Frontier
A
How much of two goods a firm/industry or country can produce, using the factors of production, and the trade off that occurs when they change the production levels
2
Q
Opportunity cost
A
The benefits lost when a choice is made
3
Q
What does a PPF show?
A
It’s not telling us what to we should do, it’s only telling us what we could do
4
Q
What does a Straight line PPF show?
A
Shows a constant trade off, it doesn’t matter how far you move along the line, the amount given up will be proportionally same
Factors of production are equally transferable therefore there is a constant opportunity cost
5
Q
What does a Curved PPF show?
A
Shows that trade off is no longer constant, it has an increasing opportunity cost
