Microeconomics Chapter 2

Front 1

Production Possibility Model

Back 1

Shows the mix of two types of output an economy can produce in a given time period using its available resources and technology.

Front 2

Assumptions of the PPM

Back 2

1. There's a Fixed amount of resources available.
2. Constant level of technology 3. Full employment of available resources
4. Efficient production

Front 3

Efficiency

Back 3

1. Productive (Technical)- Least cost 2. Allocate ( Economic)- Producing the good most desired by society at least possible cost.

Front 4

Production Possibility Schedule

Back 4

A

Front 5

Production Possibility Frontier

Back 5

A

Front 6

Straight-Line PPF

Back 6

The resources & technology used in production are easily well suited.

Front 7

Consumer Goods

Back 7

Produced for final goods

Front 8

Capital goods

Back 8

Inputs; Used for Multiple goods

Front 9

Points on the Curve

Back 9

Full Employment; Maximums with our given resources and current technology

Front 10

Points Inside

Back 10

Not producing efficiency; Unemployment of resources, inefficient production.

Front 11

Points Outside the Curve

Back 11

Unattainable

Front 12

Choice

Back 12

Society must choose what to produce

Front 13

Shape of the curve

Back 13

Bows outward due to increasing opportunity cost

Front 14

Law of Opportunity Cost

Back 14

States that in order to increase production of one type of output increasing the amount of the other must be sacrificed.

Front 15

Production Possibility Model & Economic Growth

Back 15

1. Increase in Resources available for production
2. Increase in Technology used in production

Front 16

FACT

Back 16

Countries that produce more capital consumer goods will grow faster than countries that produce more consumer goods.

Front 17

Chapter 2

Back 17

Production Possibility Model