Point X
represents an inefficient use of resources, while point Y represents a goal that the economy simply cannot attain with its present levels of resources.
Which points are inefficient?
Points that
lie strictly to the left of the curve
are said to be inefficient, because existing resources would allow for production of more of at least one good without sacrificing the production of any other good. At any such point, more of one good can be produced only by producing less of the other.
What does point F represent?
Point F in the graph below represents
an inefficient use of resources
. This point can also represent higher than normal unemployment. Point G represents a production level that is unattainable.
Which point is attainable inefficient?
All points inside PPF
are inefficient points. These points are attainable (e.g., point U), but they are not using the resources at the fullest. At point U, if technology or resources are used at full capacity, the economy could be at point B or C, meaning more would be produced.
Why points inside the PPF are inefficient?
Points that lie strictly below the frontier/curve are inefficient, because
the economy can produce more of at least one good without sacrificing the production of any other good
, with existing resources and technology. Points that lie on the frontier/curve are efficient.
Why is a PPF curved?
The first is the fact that the budget constraint is a straight line. This is because its slope is given by the relative prices of the two goods. In contrast, the PPF has a curved shape
because of the law of the diminishing returns
.
In which situation PPC is a straight line?
A PPC curve can be a straight line only
if the marginal rate of transformation (MRT) is constant throughout the curve
. A MRT can remain constant only if both the commodities are equally constant and the marginal utility derived from their production is also constant.
What are the 4 factors?
Economists traditionally divide the factors of production into four categories:
land, labor, capital, and entrepreneurship
.
What are the 5 key economic assumptions?
- Self- interest: Everyone's goal is to make choices that maximize their satisfaction. …
- Costs and benefits: Everyone makes decisions by comparing the marginal costs and marginal benefits of every choice.
- Trade- offs: Due to scarcity, choices must be made. …
- Graphs: Real-life situations can be explained and analyzed.
What is the slope of PPC?
The slope of any PPC
equals the marginal cost of producing x
, so if the slopes of the two PPC's are equal, then A's marginal cost of producing x is equal to B's marginal cost, and production is efficient.
Why is PPC concave?
Production Possibility Curve (PPC) is concave to the origin
because of the increasing opportunity cost
. As we move down along the PPC, to produce each additional unit of one good, more and more units of other good need to be sacrificed. … This confirms the concave shape of PPC.
What is PPC in microeconomics?
The
Production Possibilities Curve
(PPC) is a model used to show the tradeoffs associated with allocating resources between the production of two goods. The PPC can be used to illustrate the concepts of scarcity, opportunity cost, efficiency, inefficiency, economic growth, and contractions.
Who introduced production possibility curve?
The concept that came to be known as the production possibilities curve was first outlined by
the Austrian-born American economist Gottfried von Haberler
(1900-95).
What would cause a point to fall inside of the PPC?
Lesson Summary
Shifts in the production possibilities curve are caused by things that
change the output of an economy, including advances in technology
, changes in resources, more education or training (that's what we call human capital) and changes in the labor force.
What do points inside the PPF indicate?
Points inside the PPF.
The can be produced but are inefficient
. Possible reasons resources did not get used efficiently in the production some resources are unemployed. Points outside the PPF.
Which production point is unattainable?
The PPC can demonstrate the fact that because of scarcity, we must make choices.
A point outside the PPC (like point A)
is unattainable. Given our assumptions, this economy cannot produce at point A. As we learned in our lesson on graphing, any point on a graph represents two numbers.
