Productions possibilities unit 1

January 6, 2016

Trade Offs: the alternative that we give up when we choose one course of action over another

Opportunity Cost:form of trade-off (next best alternative)

Production Possibility Curve(PPC) Frontier (PPF) Graph (PPG)

(PPG) : alternative ways to use an economy's resource 

 

• Inside of the curve: attainable but inefficient
• on the curve: attainable and effiecnt
• Outside of the curve: unattainable

Four Assumptions of a PPG

1. Two goods
2. Fixed resources
3. Fixed technology
4. Full employment of resources

Allocative Efficiency : the products being produced are the ones most desired by society

Productive Efficiency : products are being produced in the least costly way. It is any point on the PPC.

Efficiency: using resources in such a way as to maximize the production of goods a services

Under-utilization : using fewer resources than an economy is capable of using.

3 types of movement that occur within the PPC

1. in side the PPC: resources unemployed or under employed
2. along the PPC: shift along the curve
3. shifts of the PPC: when resources and Technology change

January 7, 2016

What causes the PPC/PPF to shift?

1. Technological change
2. Change in resources
3. Change in labor place
4. Economic growth
5. National disaster/war/famine
6. More education in training (human capital)