33519085
Description
Flashcards by Dani Young, updated more than 1 year ago
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Created by Dani Young
over 3 years ago
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| Question | Answer |
| Define the purpose of the PPF Model | Is a model used to illustrate the combinations of two goods that can be produced. |
| Two Assumptions made when the PPF Model is Drawn | * There is a fixed Level of technology * There is a fixed quantity of resources |
| The combination of goods on the curve being produced, resources are being used fully and efficiently at point x. | |
| Shows that additional resources or technology is available to both Good A and B, shifting the PPF curve outwards from point A to B. | |
| Shows that additional resources or technology is available to only Good B, shifting the PPF curve outwards from point A to B on Good B's end. | |
| Increase in Productive Capacity Access to additional resources or technology that allows more of both goods to be produced with the existing resources for both goods. | |
| Limitations of the PPF Model | * Model is hypothetical, cannot be calculated and not accurate * Can only show combinations of two goods * Technology and availability of resources are ever-changing-changing the position of the curve |
| The PPF will shift inward when | * An economy has exhausted its resources (depletion of natural resources) * Erosion of capital (less investment in capital, no capital to replace old capital breaking down, less production of goods) |
| A point within the PPF will shift inwards when | Greater unemployment of resources i.e capital, labour, etc |
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