Production possibility diagrams

Question 1

define ppb

Answer 1

indicates maximum possible output that can be achieved given a fixed set of resources and technical particular time period

Question 2

factors shifting ppb to the right

Answer 2

• investment new/more tech
• new resources
• increased supply of labour through income in population and migration
• improvements in human capital through education and training
• encouraging entrepreneurship
• increased productivity

Question 3

define productive efficiency

Answer 3

achieved in an economy when it is not possible to make anyone better off without making someone worse off or you cannot produce more of one good without making less of another

Question 4

define allocative efficiency

Answer 4

occurs when available economic resources are used to produce combination of goods that best match peoples tastes and preferences