Production Possibility Frontiers
- Created by: Former Member
- Created on: 30-04-15 18:02
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- Production Possibility Frontiers (Curves).
- Refer to page 8 in revision guide for graph examples.
- Show the maximum possible output.
- They show the options that are availiable when you consider production of two types of goods/services.
- They can be drawn for ANY two types of good/service.
- Points on the curve are achieveable without using any extra resources.
- If it is outside the PPF, it is not achieveable with the current level of resources.
- If it is inside the PPF it means that the mix of goods is productively inefficient.
- If levels of resources are fixed, a movement ALONG a PPF indicates a reallocation of resources.
- HOWEVER an improvement in labour or technology can also shift the PPF outwards because it = more output produced using the same resources.
- If total amount of resources change, the PPF SHIFTS.
- An outward shift = ECONOMIC GROWTH.
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