Production possibility diagrams Flashcards
also known as PPF production possibility frontier
1
Q
How do you draw a PPF
A
2
Q
What is a PPF?
A
Shows the maximum potential output combination of two goods that an economy can achieve when all its resources are fully and efficiently employed
3
Q
How does PPF show economic efficency?
A
Any point on the PPF shows productive efficient allocation of scarce resources. If the point is inside the PPF it shows an inefficient allocation of resources.
4
Q
What does a straight line PPF show?
A
It shows a perfect substitutability of resources
5
Q
Causes of outwards shifts?
A
6
Q
What causes an inward shift of PPF?
A
This is caused by a fall in the productive potential of a country i.e. something that causes a decrease in the factors of production e.g War , or large scale migration
