Production Possibility Frontier Flashcards
What is a production possibility frontier?
A production possibility frontier illustrates the maximum potential output of an economy when
all resources are fully employed.
What dos this graph suggest?
A,B,C (any point on PPF)- implies that all resources are fully and efficiently employed. all points on the PPF indicate
the maximum productive potential of an economy and that resources are
being used efficiently.
Point X means underutilised goods- factors of production not being utilised
What if there is a point to the right of the PPF?
This means its currently unobtainable and can only be obtainable if there is economic growth.
How can economic growth be shown on a PPF?
An increase in quality or quantity of the inputs to the productive process means an economy has increased its productive potential.
How can growth in an economy happen?
- quantity of resources available for production increases, for instance there might be an increase in number of workers in an economy.
