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Production possibility frontier (Reducing productive capability (Causes…
Production possibility frontier
PPF
PPF shows different combinations of output for two different products
Shows productivity of a firm using their resources
Model to show the different outputs of a firm/country
Productive and allocative
Allocative efficency
Producing services and goods that meets the population
Allocative infficency
Not producing enough for the population
Productive efficency
Occurs anywhere along the PPF
Reducing productive capability
Results in decrease in productive capacity
Causes
Natural disasters
Civil unrest
Emigration
Obselete equipment
Ageing population
Causes PPF to shift inwards
Economic shrinkage occurs when there is a reduction in an economys production capacity
Depression
Lower demand for consumer goods
Capital equipment can export more goods
Macro PPF
Capital goods
Goods that will produce a stream of income like machinery
Consumer goods
Produce an immediiate benefit to the comsumer (finite)
Factors of production
Labour
Enterprise
Land
Capital equipment
An increase in economic growth can be caused by an increase in one of the factors of production