Product possibility frontier

• What does the line that points BAC on a PPF diagram represent?

  It represents the maximum amount of good X and good Y that a government can produce.
• What factors must be met for a business to be on the PPF line?

  Having no spare capacity, full level of employment, and all available land being used to produce goods.
• What does the product possibility frontier (PPF) depict?


  The PPF depicts the macro economy as a whole.
• How does the PPF graph illustrate economic growth over time?

  It shows short run and long run growth for a country over a period of time.
• What signifies long run economic growth in a PPF?

  The shift of the PPF.
• What can a PPF indicate about a country's employment rate?

  A PPF can show a country's employment rate and how well they are allocating resources.
• Why must choices be made about the type of good to produce according to the PPF?

  Because resources and capacity are limited.
• What are the key factors that allow a business to be on the PPF line?


  • No spare capacity
  • Full level of employment
  • All available land is being used to produce goods
• What does the PPF reveal about an economy's current state?

  • Growth potential
  • Maximum current inputs
  • Employment rate
• What is allocative effiency

  Allocative affiency is producing the combination of goods on societys preferences
• what is Productive effiency

  Maximising output using avaliable resources any point on the ppf