Scribd
Upload
34 views1 page

Chapter 4 - Production Possibility Curves

Uploaded by

Iceblue
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
34 views1 page

Chapter 4 - Production Possibility Curves

Uploaded by

Iceblue
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 1

Chapter 4: Production possibility curves

Key Points:
 A PPC can be used to show how recourses in an economy can be allocated.
 There is a difference between a movement along a PPC and a shift in a PPC.

Main Points:

 A production possibility curve measures the maximum output of two


goods using a fixed amount of input. The input is any combination of the
four factors of production.
o Each point on the curve shows how much each good will be
produced when resources shift from making more of one good and
less of the other. 
o Reallocating scarce resources from one product to another
involves an opportunity cost
o If we increase our output of consumer goods (i.e. moving along the
PPF from point A to point B) then fewer resources are available to
produce capital goods

Combinations of the output of consumer and capital goods lying inside the PPF
happen when there are unemployed resources or when resources are used
inefficiently. We could increase total output by moving towards the PPF

Allocative Efficiency - You are allocating all of your resources, so the maximum
output is achieved. 

The law of Diminishing Returns - The law of diminishing returns says that as
we add more units of a variable output to factors of production then output will
initially rise and then fall

Exam Questions:

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy