Production Possibility Frontiers

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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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