UNIT 1: all about the PPC

The 3 points within a ppc

video on ppc

 

• points A and B are attainable and efficient
• point D is attainable and inefficient. this can be caused by: under utilization, unemployment, recession, war, famine, etc 
• point C is unattainable using current resources. technology and economic growth can make this attainable. 

Three types of movements on the ppg: 

1.    

shifts of the ppc

2.    

along the ppc

3.    

inside the ppc

What are the four key assumptions? 

1.     can only produce 2 goods at once

2.     full employment 

3.     fixed resources 

4.     fixed technology 

law of increasing opportunity cost- when the resources are shifted from making one good or service to another; the cost of producing a second item increases. 

what are the two types of efficiency?

1.     productive- products are being produced in the least costly way; this is any point on the ppc

2.     allocative-the products being produced are the ones most desired by society; this optimal point on the ppc depends on the desires of the society