1.1.4 PPF's

Question 1

What is a PPF?

Answer 1

Production possibility frontier

Question 2

What does a PPF show?

Answer 2

The maximum potential output combinations of two goods and services and economy produce when all resources are efficiently employed

Question 3

What is opportunity cost?

Answer 3

The value of the next best alternative forgone

Question 4

What is a consumer good?

Answer 4

Good, we consume, e.g. pizza

Question 5

What is a consumer durable?

Answer 5

Products that provide a steady flow of satisfaction over their lifetime, e.g. washing machine machines

Question 6

What is a consumer non-durable?

Answer 6

Products that are consumed only once, e.g. drinking a coffee.

Question 7

What is a consumer service?

Answer 7

A non-physical good e.g. getting a haircut or watching a show

Question 8

What is a capital good?

Answer 8

Goods used to produce consumer goods, e.g. oven

Question 9

List five causes of an outward PPF shift

Answer 9

1) higher productivity/ efficiency of factor inputs
2) better management of factor inputs
3) increase in the stock of capital and labour supply
4) innovation and invention of new products and resources
5) discovery/extraction of new natural resource resources (land)

Question 10

List four causes of an inward PPF shift

Answer 10

1) damaging effects of natural disasters
2) destruction of factor inputs as a result of conflict
4) large scale added migration due to economic depression
4) decline in the productivity of fact inputs caused by persistent recession causing net investment to be negative