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Section 1 - Economic problem - PPFs - Coggle Diagram
Section 1 - Economic problem - PPFs
Basics
Production possibility frontiers
Show the maximum amounts of two goods or services an economy can produce
Points within or on the PPF are achievable without using extra resources
Points on the PPF are only achievable when resources are used as efficiently as possible, these points are productively efficient
Points that lie outside the PPF are unnachievable
Economic growth
If the total amount of resources increased, then the total possible output of that economy would also increased, PPF shifts outward
Improved technology/ labour can allow for more output
Outward shifts show economic growth
Fewer total resources available can lead to PPF shrinking inwards as total possible output has decreased
Reasons for outward shifts
Better tecnhology
Better management
New natural resources
Higher productivity of workers
Reasons for inward shifts
Natural disasters
Large scale outward migration
Decline in productivity
Resource depreciation due to wear and tear
Resource depletion - usage of resources at a faster rate than they're replenished
Opportunity cost
What you give up inorder to do something else
Consumers use it to chose what to spend their income on
Producers use it to look at the profit foregone by not making an alternative product
government use it to look at the lost value to society from the polices they chose not to inforce
Problems
Not all alternatives are known
Some factors don't have alternative uses
May be a lack of information on alternatives
Some factros can be hard to switch to an alternative use
The cost of a choice measured in the next best alternative that's given up
Markets
Way of allocating resources
Each buyer or seller chooses to exchange something they have for something they'd prefer to have instead
Workers would prefer to have wages but work less time