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Ppf shifts revision
- 2. • Production possibilityfrontier (PPF): curve showing the maximum combination of goods or services that can be produced in a given period with available resources.
- 3. Now we needto think about the economy as a whole rather than the individual. Consumption and investment • Consumer goods are for present use, whereas the capital goods are to be used to increase the future capacity of the economy – in other words, for investment
- 4. Production Possibility Frontiers CapitalGoods Ym Yo A If it devotes all Assume a country If the country is resources to capital If it reallocates its can produce the at pointcould two resources (moving round goods it A on types can to B) the PPF from maximum A PPF It ofagoods it can produce produce more consumer with its the of Ym. produceresources goods but only at the – capital goods combination of Yo expense of fewer capital If it devotes all its and The opportunity goods.consumer and resources to capital goods goods cost of producing anit consumer goods extra Xo X1 consumer Xo – consumer goods could produce a is Yo – Y1 capital goods. goods maximum of Xm B Y1 Xo X1 Xm Consumer Goods
- 5. Shifts in theproduction possibility frontier • Increase in the quantity or quality of resources. • Expansion of further and higher education and government training schemes. • Increase in investment • Development of new technology
- 6. • How wouldthis effect the PPF?
- 7. MCQs page 14of workbook Examiner tips Always define key economic concepts in the supported multiple and data response questions. Marks are always awarded for this Be prepared to annotate or draw a diagram of a PPF when answering questions on this concept. Marks are usually available in the mark scheme
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