PRODUCTIONS POSSIBILITIES GRAPHS
Notes from (1/6/16-1/7/16)
VOCABULARY
Trade Offs- Alternative that we give up when we choose one course of action over another
Opportunity Cost- Form of trade off
- Next best alternative
- "Settling"
Efficiency- Using resources in such a way as to maximize the production of goods and services
Underutilization- Using fewer resources than the economy is capable of using
Allocative Efficiency- Products being produced are the ones desired by society
Productive Efficiency- Products being produced in the least costly way
NEED TO KNOWS
Production Possibilites Curve (PPC)
Production Possibilites Frontier (PPF)
Production Possibilities Graph (PPG)- Shows alternative ways to use an economy's resources
P.S.- PPC and PPF are the same thing!
FOUR ASSUMPTIONS OF THE PPG
1.) There are 2 goods: Cannot produce more than 2 goods at a time
2.) Fixed Resources: Quantities of factors of production stay the same
3.) Fixed Technology: Information and knowledge about resources stays the same
4.) Full Employment of Resources
Point A- Inside the Curve
- Attainable, but Inefficient
- Underutilization
Points B, C, D- On the Curve
- Attainable, and Efficient
Point X- Outside the Curve
- Unattainable
TYPES OF MOVEMENT IN PPC
1.) Inside the PPC- Means resources are unemployed or underemployed, Productive Efficiency
2.) Along the PPC- Can shift along the curve, but cannot go IN or OUT
3.) Shifts of the PPC- When resources and technology change
CAUSES THE PPC/PPF TO SHIFT
1.) Technological Change
2.) Change in Resources
3.) Change in the Labor Force
4.) Economic Growth
5.) Natural Disasters/ War/ Famine
6.) More Education or Training (Human Capitol)
-JaelyNoTainted
Like Jaelyn (SPACE) Not (SPACE) Tainted
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