PPFs, Specialisation, Functions of money (Pck 2)

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  • Created by: KTPL
  • Created on: 05-12-16 18:23
What does PPF stand for?
Production Possibility Frontier
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What is a PPF?
A curve showing the maximum potential level of output for two goods/services, when all its resources are being used efficiently
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Referring to the use of resources, what is happening when there is maximum productive potential, and what is this on the PPF?
When all resources are fully used + the curve of the PPF
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How is opportunity cost shown on a PPF?
An arrow from A to B (or whatever letters used on the curve), and arrows on the axis
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If there is a point below the curve, what is happening with resources?
Not all resources are being used
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If there is a point outside of the curve, what is happening with resources?
Using more resources than what they have/is available - it is not yet possible
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What does a movement along a PPF show?
The allocation of resources has changed, but the productive potential remains the same
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What does a shift outwards of the curve show?
The firm can make more of everything - there is economic growth
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What are the possible causes of a shift of the curve?
More/less resources; Use resources more/less efficiently
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What does a shift of only one end of the curve show?
Mass production/efficient production of that product - this makes no difference to the other product
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What is a capital good?
A good that is used to produce consumer goods or other capital goods
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What is a consumer good?
A good that provides direct satisfaction to consumers
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Which good would provide high living standards?
Consumer goods
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Which good would increase economic growth?
Capital good
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What is an issue with too many consumer goods?
Few capital goods to make many consumer goods, so would be costly to make; quality may deteriorate; economic growth would slow
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What is an issue with too many capital goods?
Too many capital goods to make only the few consumer goods; there would be lots of economic growth but the quality of life will deteriorate (e.g. China)
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If the shape of the PPF was a curve/bowed (like usual), what does this show?
As more of one good is produced, an increasing amount of the other is sacrificed (increasing opportunity cost)
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Sometimes the shape of the PPF is a straight line. Why is this?
The resources are equally suited to the production of both goods. Resources can be easily transferred between the two goods.
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What is labour productivity?
A measure of output per worker
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How do you calculate productivity?
Total output / No. of workers
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Higher labour productivity usually leads to lower what for a business?
Lower average costs
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How can you increase labour productivity?
1. Specialisation/division of labour 2. Feel valued (promotion/responsibilities). 3. Improvement in technology
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What is specialisation?
When an individual, firm, region or country concentrates on the production of a limited range of goods/services
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What are the four areas that can specialise?
Individuals, firms, countries, regions
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What are a few benefits of specialisation?
Can produce what naturally good at; surplus can be sold for other goods/services; forces nations to co-operate
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What are a few drawbacks of specialisation?
Higher element of risk than being self-sufficient; resources may eventually run out
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What is division of labour?
The specialisation of workers on specific tasks in the production process
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3 benefits of division of labour
Increased productivity; Less time wasted; Lower training costs
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3 drawbacks to division of labour
Repetition of the job; Inflexible skills; Worker power (trade unions/strikes)
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What are the 4 functions of money?
Medium of exchange; Measure of value; Store of value; Method of deferred payment
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What is a medium of exchange, in terms of money?
Enables buying and selling, making exchange easier. Eliminates bartering
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What is measure of value, in terms of money?
Enables a value to be placed on products - bought and sold with ease. Allows comparisons
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Why is money used as a store of value?
Convenient way of storing wealth, to be spent at a later date
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Why is money a method of deferred payment?
Enable borrowing/lending, so someone can buy a product rather than waiting
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Other cards in this set

Card 2

Front

What is a PPF?

Back

A curve showing the maximum potential level of output for two goods/services, when all its resources are being used efficiently

Card 3

Front

Referring to the use of resources, what is happening when there is maximum productive potential, and what is this on the PPF?

Back

Preview of the front of card 3

Card 4

Front

How is opportunity cost shown on a PPF?

Back

Preview of the front of card 4

Card 5

Front

If there is a point below the curve, what is happening with resources?

Back

Preview of the front of card 5
View more cards

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