MICROECONOMICS: Opportunity Cost and Production Possibility Frontiers
What is a Possibility Production Frontier?
A graph to show the maximum number of goods and services an economy can produce using their resources to their full potential
What labels are on the axis of a PPF?
Good A and Good B
Define 'scarcity'
Having unlimited wants but limited resources
How does a PPF diagram demonstrate opportunity cost?
If the resources are biased towards good a or good b, there is an opportunity cost in allocating resources to one good over the other
If an economy are situated inside the curve of the PPF, they are
Inefficient
What are the four resources an economy may want?
Land, labour, capital, entrepreneurship
What can be used to demonstrate opportunity cost?
PPF diagram
If an economy are situated on the curve of the PPF, they are
Productively efficient
What is opportunity cost?
The cost of choosing one option rather than another
If an economy are extended outside the PPF, what does this mean?
They cannot reach this point of efficiency with the current resources they have
Straight lined PPFs mean
What is needed to produce Good A is exactly the same as to what is need to produce Good B