PPC

production possibility curve

• it shows the alternative combinations of any two goods or services that can be produced if all the available resources are fully and efficiently used

what does the ppc illustrate

• scarcity

• choice

• opportunity cost

scarcity/impossible point

• scarcity is illustrated bu all the points to the right of the curve(outside the curve)

• our resources are not enough to produce at that point

• also called the unattainable point

opportunity cost

• the value of the best forgone opportunity

inefficiency

• production points inside the ppc

• watse of resources as they are not utilised to its maximum

group of indifference curves?

map of indifference curves

what is the point where the indifference curve meets the ppc

point of efficiency

when is a market efficient

when it used all available resources efficiently and produces the maximum possible output for the minimum cost

name and explain the types of efficiency

1. pareto efficiency: occurs when it is not possible to change the existing allocation of resources in such a way that someone is made better off without making someone else worse off. it is achieved when productive and allocative efficiency coincide.

2. allocative: achieved when the product mix reflects the tastes and preferences of consumers. resources are allocated in the right proportions to produce the different goods and sevices

name and explain the types of inefficiencies

1. production: when resources are not utilised to its maximum. producers produce at a point inside the ppc. imperfect markets and negative externalities are effects of productive inefficiency.

2. allocative: this is where the goods and services produced do not reflect the needs, wants , tastes and preferences of consumers. producers may use uo all resources but produce a mix of products that consumers do not desire.

the four effects of inefficiencies

1. the economy cannot produce the maximum quantity, quality and variety of goods and services that consumers prefer

2. factors of production are wasted

3. consumers are offered fewer goods and services, often of a poor quality and at a higher price

4. standard of livingis dropped below the country’s potential

4 reasons for inefficiencies

1. lack of employment opportunities

2. slow economic development

3. exploitation of consumers

4. poor infrastructure