Unit 1: PPF

• What is Production Possibility Frontier/Curve?

  An economic model that demonstrates the maximum possible production of two goods/services using all of its factors of production
• What does the PPF showcase?

  !)The maximum possible production of 2 goods with given factors of production. 2)The many combinations of 2 goods that can be produced with given factors of production.
• How does PPF showcase opportunity cost?

  Through marginal analysis
• What is marginal analysis?


  The additional costs and benefits of making a decision
• What does the movement of the PPF indicate?

  A change in the allocation of of the existing resources within an economy
• Why does a PPF shift?

  To indicate economic growth or decline
• What is economic growth?

  When the PPF shifts outward and there's an increase in the quantity or quality of the available factors of production of an economy.
• What is economic decline?

  When the PPF shifts inward. When an impact within the economy reduces the quantity or quality of the available factors of production.
• Capital vs consumer goods

  Capital goods are assets that produce an output and consumer goods are end products that have no future productive use.
• What happens to production when there is an increase in quantity or quality of factors?

  Production increases at a greater rate
• What is the effect of decreasing quantity or quality of factors on production?

  It shifts the curve to the left and decreases production
• Characteristics of Micro PPF


  Focus on two specific goods, concave shape and increasing opportunity cost, and number of combinations possible.
• Law of increasing opportunity cost


  The more something is produced, the more something else has to be given up
• Macro PPF characteristics


  Focus on goods & services OR Capital & consumer goods, focus on entire economy, and linear shape and constant opportunity cost
• Law of constant opportunity cost


  Change between any production points will be consistent
• Point on the curve


  Productive efficiency and attainable production
• Point inside the curve (Micro)


  Productive inefficiency and unattainble production
• Point inside the curve (Macro) 


  Unemployment
• Point outside the curve


  Unattainable produuction
• Productive efficiency


  Maximum production from all factors available; no waste of resources
• Productive inefficiency


  Wasting factors of production
• Unattainable production


  Factors of production are not sufficient for production
• Attainable production


  When factors of production are sufficient for production
• How to increase production from inefficieny?

  Use the factors of production better
• How to increase production from efficieny?

  Reallocate the use of factors of production
• Result of increasing the quality/quantity of factors?


  Curve shifts to the right and increase in production of goods
• Result of decreasing the quality/quantity of factors?


  Curve shifts to the left and decrease in production