production possibility boundary

• definition of a PPF

  the combination of two goods which an economy is capable of producing using all its resources in the most efficient way

  • all are possible but only one can be chosen because of the existence of Scarce Resources, meaning by making a choice between the options an Opportunity cost is incurred
• consumption and investment

  consumer goods - for present use

  capital goods - used to increase the future capacity of the economy (investment)
• ppf

  Point A and B indicates that resources are being used to max capacity (full employment)

  a point in the ppf shows underemployment of resources aka not being used efficiently, efforts should be made to improve efficiency and move towards unemployment

  points outside the ppf is unreachable given the present set of resources

  
• why is the PPF line curved and not straight?

  as not all factors of production are equally suited to the production of both goods

  • When the economy is well balanced, as at A, the factors can be allocated to the uses for which they are best equipped.​
  • But as the economy moves towards complete specialisation in one of the goods, factors are no longer being best used and the Opportunity Cost increases.​
• shifting the frontier

  move to the right when

  • improvements to productivity and efficiency (maybe bc of new tech or advanced techniques of production)
  • more factor resources are exploited (increase in available workforce or a rise in capital equipment)
• production possibility frontiers

  when u get more resources - u shift the frontier to the right as it helps the economy produce more

  
• long run economic growth

  an increse in the potential real output the economy can produce over a period of time

  
• b to c

   A movement from B to C means a reduction in the availability of consumer goods and so current living standards are likely to fall. It also means an increase in the production of capital goods which are used to increase the future availability of consumer goods. This means future living standards are likely to rise.​