Flashcards
LvL 2 Economics Exam Prep 91224 - PPF Model
Cards in this deck (9)
- 1Define the purpose of the PPF ModelIs a model used to illustrate the combinations of two goods that can be produced.
- 2Two Assumptions made when the PPF Model is Drawn* There is a fixed Level of technology
* There is a fixed quantity of resources - 3—The combination of goods on the curve being produced, resources are being used fully and efficiently at point x.
- 4—Shows that additional resources or technology is available to both Good A and B, shifting the PPF curve outwards from point A to B.
- 5—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.
- 6—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.
- 7Limitations 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 - 8The 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) - 9A point within the PPF will shift inwards whenGreater unemployment of resources i.e capital, labour, etc
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- Key concepts around the PPF model in relation to Level 2 economics external, 21224, Analyse Economic Growth Using Economic Concepts and Models
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- Dani Young
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