Why is production at point G inefficient?
If a country does not use its resources efficiently (unemployment), then it is operating inside the production possibilities curve (point G). It follows that output cannot increase if resources and technology remain constant.
What are 3 things that production possibilities can explain?
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.
What are the 4 assumptions of the production possibilities model?
The four key assumptions underlying production possibilities analysis are: (1) resources are used to produce one or both of only two goods, (2) the quantities of the resources do not change, (3) technology and production techniques do not change, and (4) resources are used in a technically efficient way.
Which points 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 are all goods and services scarce?
Scarcity always exists. There simply are not enough goods and services to supply all of society’s needs and wants. This is because the resources that go into making those goods and services are themselves scarce. All goods and services are scarce because the resources used to produce them are scarce.
What do you mean by production possibility of an economy?
Answer: Production possibilities of an economy refer to different combinations of goods and services which an economy can produce from a given amount of resources and a given stock of technology.
What is the maximum quantity of guns that can be produced?
Guns or Butter?
| Criteria | Weight |
|---|---|
| Explain why scarcity exists in this economy, and use data to justify | 2 |
| Calculate maximum quantity of guns that can be produced | 1 |
| Calculate maximum quantity of butter than can be produced | 1 |
| Draw the nation’s production possibility curve | 3 |
What are the main assumption of PPF?
PPF is the curve that shows the best (maximum) combinations of two outputs that an economy can produce given three assumptions: 1) Technology is fixed; 2) Resources are fixed; and 3) Resources are used at their fullest.