Studied by 7 peopleAP Macroeconomics Unit 1 test review.
A price ceiling leads to…
a shortage
A price floor leads to…
a surplus
PPC stands for…
Production Possibilities Curve
What does a PPC graph show?
Alternative ways that an economy can use its scarce resources
What’s the opportuniy cost?
The most desirable alternative
How is opportunity cost shown on a PPC graph
the slope of the PPC. As more of each resource is allocated to production, the opportunity cost of producing an additional unit of a good typically increases. When we represent this increasing opportunity cost into the PPF the curve bows out.
The law of increasing opportunity costs
As you produce more of any good, the opportunity cost will increase (resources are not easily adaptable to producing goods). Result is a concave PPC.
Difference between shift of point vs. entire curve on the PPC.
A shift along the curve means a change in resources for goods, whereas a shift of the curve is a change in factors of production, productivity, tech, or trade.
Note
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