Production Possibilities Frontier and Opportunity Costs

This set of flashcards focuses on key terminology related to the Production Possibilities Frontier and Opportunity Costs as presented in the lecture notes.

Production Possibilities Frontier (PPF)

The boundary between combinations of goods and services that can be produced and those that cannot.

Ceteris Paribus

A Latin phrase meaning 'all other things being equal,' used in economics to isolate the relationship between two variables.

Tradeoff

The need to give up one good or service in order to obtain another.

Production Efficiency

Achieved when it is not possible to produce more of one good without producing less of another; points on the frontier indicate efficiency.

Opportunity Cost

The amount of one good that must be given up in order to obtain another good.

Inefficient Production

A situation where it is possible to produce more of one good without producing less of another good, resulting in wasted resources.

Economic Growth

An expansion of production possibilities enabling more goods and services to be produced.

Comparative Advantage

The ability of a person or country to perform an activity at a lower opportunity cost than others.

Absolute Advantage

The ability of a person or nation to produce more goods with a given amount of resources than another.

Consumption Possibilities Frontier

A trade line showing the consumption levels that can be achieved through specialization and trade, extending beyond the PPF.