Understanding Production Possibility Frontiers and Economic Allocation

Flashcards covering key concepts from the lecture on Production Possibility Frontiers and economic resource allocation.

What does PPF stand for and what does it represent?

PPF stands for Production Possibility Frontier, representing an economy's maximum production potential given its resources and technology.

What does opportunity cost mean in economics?

Opportunity cost is the cost of choosing one option over another.

How is marginal analysis related to production?

Marginal analysis involves analyzing the cost and benefit of producing one more unit of a good.

How does the slope of the PPF illustrate opportunity cost?

The steeper the slope of the PPF, the higher the opportunity cost.

What does an outward shift of the PPF indicate?

An outward shift of the PPF indicates economic growth and an increase in productive capacity.

What does an inward shift of the PPF signify?

An inward shift of the PPF signifies economic decline and a reduction in productive capacity.

What do points on the PPF represent?

Points on the PPF represent efficient resource allocation, where all resources are fully utilized.

What do points inside the PPF indicate?

Points inside the PPF indicate inefficiency, where resources are underutilized.

What is the difference between attainable and unattainable production points on the PPF?

Points on the PPF are attainable with current resources and technology, while points beyond the PPF are unattainable without changes.

What is an example of PPF in a real-world scenario?

An economy producing healthcare and education; an outward PPF shift due to healthcare technology advancements decreases the opportunity cost of education.

What do movements along the PPF represent?

Movements along the PPF represent changes in the quantity produced of one good while holding the other constant.

What causes shifts in the PPF?

Shifts in the PPF are caused by factors like technological progress, increased resources, or improvements in labor productivity.

What are capital goods?

Capital goods are goods used to produce other goods and services, including machinery, factories, and technology.

What are consumer goods?

Consumer goods are items purchased for personal use and consumption, such as clothing, food, and electronics.

Why is the distinction between capital and consumer goods important?

Capital goods are essential for long-term economic growth, while consumer goods satisfy immediate needs but do not contribute to future growth.