PPC

Question 1

What does PPC stand for ?

Answer 1

• Production Possibility Curves

Question 2

What is PPC based on ?

Answer 2

• relative quantities of any two goods

Question 3

What 5 things does a PPC diagram illustrate ?

Answer 3

• scarcity
• opportunity cost
• increasing opportunity costs (as resources move from producing milk to producing wheat)
• all points on PPC represent the productively efficient output
• producing inside the ppc means the economy is not achieving productive efficiency

Question 4

What is a constant cost PPC ?

Answer 4

• where the PPC is a straight line
• and the opportunity cost stays the same as resources are moved from producing one good to another

Question 5

When does growth occur in a PPC ?

Answer 5

• when the potential output of an economy increases over time

Question 6

What happens to PPC if potential output increases ?

Answer 6

• PPC shifts outwards and the economy can now produce more of both milk and wheat

Question 7

What are 7 reasons PPC shifts outwards ?

Answer 7

• Land:
• reclamation of land
• discovering new natural resources
• Labour:
• more labour (eg by migration)
• education + training (skilled workers)
• Capital:
• more machines + buildings
• technological advance (eg AI)
• Entrepreneurship:
• more entrepreneurs